Mansfield v. United States

76 F.2d 224, 1935 U.S. App. LEXIS 2509
CourtCourt of Appeals for the Eighth Circuit
DecidedMarch 9, 1935
Docket10073
StatusPublished
Cited by18 cases

This text of 76 F.2d 224 (Mansfield v. United States) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mansfield v. United States, 76 F.2d 224, 1935 U.S. App. LEXIS 2509 (8th Cir. 1935).

Opinion

WOODROUGH, Circuit Judge.

This appeal is taken by Wilber J. Mansfield and Frank B. Mansfield to reverse their conviction under an indictment charging use of the mails and conspiracy to use the mails in furtherance of a scheme to defraud and to obtain money by false representations in violation of section 215 of the Penal Code (18 USCA § 338).

They were managing officers of the Universal Bond & Mortgage Company, a Missouri corporation, organized under the name of Union Bond & Mortgage Company' in May, 1928, and operated until receiver was appointed in August, 1932. Its ostensible business was to make investments in first mortgages on improved real estate on a 50 per cent, valuation and in municipal, state, and United States government bonds, and to deal in like conservative securities. To provide capital, the corporation had a license from the Commissions of Missouri and Kansas to sell the shares of its preferred and .common stocks and also what it called its guaranteed bonds. The bonds were to be sold' mainly on' a monthly installment plan which called for payments at the rate of $6.15 a month for 10 years, or 120 months, on each thousand dollars of bonds.

The enterprise contemplated that many people should be induced to turn their savings over to the corporation and that the officers in control would handle the funds so obtained with skill and honesty; the evidence was that, if sufficient business of that kind could be got and if the installment payments on the so-called guaranteed bonds were collected for the company and wisely and honestly invested with skill and care, enough interest could be earned during the period covered by the bond contract to enable the company to pay off the amount of the bonds and also to pay its. expenses and gain a profit. But it is apparent that the solicitation of money from the general public for such an enterprise and the handling of the funds obtained by such solicitation imposed responsibility on those in charge to refrain from making representations that were untruthful and from dealings that were not honest.

The indictment was in the usual form that has been evolved in the federal courts to present that those in control of the promotion and operation of such a corporate enterprise used false representations to obtain money from the public and dishonest practices to divert, it, and were parties to a fraudulent scheme and conspired to and did use the mails in furtherance thereof.

There was substantial testimony for the government to the effect that, when Wilber J. Mansfield first started up the corporation m 1928, he caused it to issue its preferred capital stock of the par value of $60,000 and 600 shares of no-par stock, and he put into the corporation as consideration for such original first stock issue a deed to property in Kansas City called Landis Court. Landis Court had two mortgages against it at the time totaling $79,000, and the estimated worth of the equity deeded to the corporation was $60,000. This equity in Landis Court Mr. Wilber J.’ Mansfield had acquired by trading vacant cut-over timber lands in Arkansas therefor in 1926, and he had kept his title in the name of a straw man who executed the deed to the corporation. But at some date between June, 1928, and February, 1929, the corporation deeded away its equity in Landis Court to another straw nominee of Wilber J. Mansfield’s, who thereafter held it for him and it did not figure as an asset of the corporation. This nominee executed a number of mortgages on the property, and a minute in the records of the corporation indicates that one such mortgage for $60,000 was delivered to the company in substitution for the property itself, but that the mortgage was canceled and returned to the maker. It appears that Mr. Wilber J. Mansfield had another 3,400-acre tract of cut-over timber land in Arkansas standing in the name of a straw man, and that the consideration which ultimately went to the corporation for the preferred and common stock issued for the promoters was a mortgage executed by the straw man on the Arkansas land in the sum of $35,-000. The land was valued by the government .witnesses at two dollars to two and a half an acre, and was sold for taxes in 1930.

Both preferred stock and common issued on the original subscriptions was scattered among members of the Mansfield family and straw men who had no property or *227 interests of their own in it. The par value of the preferred was $100 per share, but the common had no par value, and was intended to be and was, on occasions, given as bonus in connection with the sale of the preferred stock and the so-called guaranteed bonds. An allotment of 5,000 shares of no-par common stock, however, was to be sold for a dollar a share, and these shares were mainly issued and distributed to members of the Mansfield family and straw men m the same manner as was the original subscription stock.

The company’s plan for selling the stocks to the public contemplated the payment of a commission of 20 per cent, to the stock salesmen. Purchasers of the guaranteed bonds were to pay in some $73.80 in a twelvemonth on a $1,000 bond, and the salesman’s commission on the transaction would be $55. It is clear that an investment company confined to dealing in ultra conservative securities would require meticulously honest and skillful management to show early earnings of a 6 per cent, dividend on a $100 share of stock which it issued for $80 net, and that it could only make payment of $1,000 at the end of 10 years to an installment savings depositor whose total payments would amount to $738, with $55 off for commission paid, by the same care and integrity.

But there was evidence for the government justifying belief that, when sales of the corporate stock of this corporation were made, the money of the purchasers was not turned to the uses of the corporation, but was in large measure appropriated by the Mansfields. Persons who were induced to buy the preferred stock for $100 a share and the common stock for $25 or $5Q a share were supplied with the stock which had been issued on the original stock subscriptions, and the original allotment of 5,000 shares distributed at the rate of $1 a share (or lieu stock reissued therefor).

An early stock purchaser was Tena Rohn who gave $8,400 value for that amount of preferred stock, and on February 4, 1929, the corporate minutes include Tena Rohn’s subscription among the original subscriptions, which original subscription was paid, so far as the corporation was concerned, by the Arkansas land mortgage. The bulk of the common stock, though distributed by the corporation at $1 a share or as a bonus, was sold to the public for from $25 to $50 a share. However feasible the plan of selling the guaranteed bonds for savings investment may have been in its theory as a safe investment for the bond buyer and a money maker for the corporation, in the business of the corporation as it actually went forward it was manifestly impossible in conservative course to earn an income upon the large amount of money which the public had been induced to invest in the corporate stock. The distribution of the common stock had brought almost no capital into the corporation, and that was also true at least as to a large part of its preferred stock. That the company could immediately earn dividends upon the $25 and $50 paid for its common stock or upon the par value of its preferred was not credible. Nor did it do so.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

United States v. Read
658 F.2d 1225 (Seventh Circuit, 1981)
United States v. Kloh
10 C.M.A. 329 (United States Court of Military Appeals, 1959)
Peckham v. United States
210 F.2d 693 (D.C. Circuit, 1953)
Bridges v. United States
199 F.2d 811 (Ninth Circuit, 1952)
Butler v. United States
191 F.2d 433 (Fourth Circuit, 1951)
United States v. Stoehr
100 F. Supp. 143 (M.D. Pennsylvania, 1951)
Deacon v. United States
124 F.2d 352 (First Circuit, 1941)
Hart v. United States
112 F.2d 128 (Fifth Circuit, 1940)
Schackow v. Government of Canal Zone
108 F.2d 625 (Fifth Circuit, 1939)
Grayson v. United States
107 F.2d 367 (Eighth Circuit, 1939)
United States v. Breen
96 F.2d 782 (Second Circuit, 1938)
Little v. United States
93 F.2d 401 (Eighth Circuit, 1937)
Paden v. United States
85 F.2d 366 (Eighth Circuit, 1936)
Galatas v. United States
80 F.2d 15 (Eighth Circuit, 1935)
Moeten v. United States
80 F.2d 61 (Eighth Circuit, 1935)

Cite This Page — Counsel Stack

Bluebook (online)
76 F.2d 224, 1935 U.S. App. LEXIS 2509, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mansfield-v-united-states-ca8-1935.