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C. E. H. McDONNELL, as Trustee in Reorganization of Equitable Plan Company, Plaintiff-Appellee, v. Fred TABAH, Defendant-Appellant, and Lowell M. Birrell, Samuel J. Smiley, Louis A. Schnider, Joseph Leznoff, Harry Workman, Harold J. Simon, Edward I. Daspin, Sol R. Kurlander, Abe Weitzman, Juan F. Aguilar-Leon, Raul De Juan, Joseph W. Crosby, Susan R. Miller, Harry M. Cutler, H. W. Perlmutter, Bell Container Corporation, Synta Corporation, Reg. Trust, Pan American Investment Corporation, Charles Holdings, Inc., Defendants

United States Court of Appeals for the Second Circuit1961-12-27No. No. 190, Docket 27259
297 F.2d 731

Summary

Holding. The court affirmed the judgment cancelling Tabah's 200,000 shares, finding sufficient evidence that he was not a bona fide purchaser because his knowledge of pending litigation, contradictory testimony, guilty plea to the fraud conspiracy, and suspicious transaction terms demonstrated lack of good faith.

This case involves a massive stock fraud scheme in which one million shares of Doeskin Products, Inc. common stock were fraudulently issued. Defendant Fred Tabah purchased 200,000 of these fraudulent shares for $183,000 and challenged a trial court judgment that cancelled his shares and found him not to be a bona fide purchaser. The appellate court examined whether sufficient evidence supported the finding that Tabah lacked good faith, reviewing factors including his knowledge of pending litigation challenging the stock's validity before purchase, his contradictory and incredible testimony, suspicious managerial compensation terms, and his guilty plea to participating in the fraudulent scheme.

The court found the entire transaction malodorous and the evidence of Tabah's participation and lack of good faith overwhelming. The evidence included not only his guilty plea but also the circumstances surrounding his purchase and his subsequent conduct with co-conspirators. The court also rejected Tabah's challenges to the trial judge's denial of continuance requests and his argument that his former counsel was improperly retained.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether evidence sufficiently supported a finding that defendant was not a bona fide purchaser
  • Good faith in stock purchase when buyer knew of pending litigation challenging validity
  • Admissibility of guilty plea and conduct with conspirators on good faith issue
  • Trial judge's discretion to deny continuance requests

Procedural posture

Defendant Tabah appealed from a judgment on the merits following a non-jury trial in which the district court cancelled his 200,000 fraudulently issued shares and found he was not a bona fide purchaser.

Authorities cited

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Opinion

majority opinion

PER CURIAM.

The background of what the trial judge quite properly described as “a bold and outrageous corporate swindle,” involving one million fraudulently issued shares of the common stock of Doeskin Products, Inc. is described in the opinions written in connection with certain interlocutory proceedings. See Ferguson v. Birrell, S.D.N.Y., 1960, 190 F.Supp. 506, aff’d sub nom. Ferguson v. Tabah, 2 Cir., 1961, 288 F.2d 665.

Defendant Fred Tabah now appeals-from a judgment on the merits, after a non-jury trial, finding appellant not to-be a bona fide purchaser of 200,000 shares of the common stock of Doeskin Products,. Inc., part of the one million shares fraudulently issued as above stated, and adjudicating the cancellation of the 200,000’ shares, for which Tabah paid $183,000.00. We find it necessary to discuss only two-of the points urged upon us as a basis-for the reversal of the judgment; and we shall assume familiarity with the comprehensive and well reasoned opinion of Judge Palmieri in the District Court, reported as McDonnell v. Birrell, 196 F.Supp. 496.

It is claimed that the evidence is not sufficient to support the finding that appellant was not a bona fide purchaser of the stock. As a matter of fact the entire transaction with appellant is malodorous from beginning to end. Prior to December 19, 1958, when appellant contracted to purchase the stock, he-knew of pending litigation challenging the validity of the entire fraudulent issue; his explanations of how he came to-purchase the stock are contradictory and the trial judge properly characterized his testimony as incredible; the terms of the contract of purchase relative to the emoluments appellant was to receive in the managerial position he was to assume when compared to the duties he was to perform, if he chose to do so, cast an atmosphere of suspicion over the entire transaction; his plea of guilty to Count One of the criminal indictment subsequently found against those who had participated in the fraudulent scheme was properly received in evidence and it was material and relevant to the issue of his good faith in purchasing the shares; and, finally, the whole course of appellant’s conduct with various members of the conspiracy was clearly admissible in evidence on the question of his alleged status as an innocent purchaser of the stock for value.

Before his testimony before trial was taken appellant sought delay for the alleged purpose of getting another lawyer; and a similar plea was addressed to the trial judge prior to the commencement of the trial. Continuances, especially in cases of this character, are matters largely resting in the sound discretion of the judge in charge of the proceedings. E.g., MacKay v. American Potash & Chemical Co., 9 Cir., 1959, 268 F.2d 512; Peckham v. Family Loan Co., 5 Cir., 1959, 262 F.2d 422, cert. denied 361 U.S. 824, 80 S.Ct. 70, 4 L.Ed.2d 68; Errion v. Connell, 9 Cir., 1956, 236 F.2d 447; Vevelstad v. Flynn, 9 Cir., 1956, 230 F.2d 695, 16 Alaska 83, cert. denied 352 U.S. 827, 77 S.Ct. 40, 1 L.Ed.2d 49; Druckman v. Forsyth Furniture Lines, Inc., 4 Cir., 1927, 22 F.2d 59. We see no basis for holding there was any abuse of discretion here. Moreover, it is far from clear that these requests for delay were not made in bad faith and in the interest of confusion and disruption of the true course of justice. Such dilatory tactics are not to be condoned; and we think the rulings were correct under the circumstances of this ease.

While it is quite true that, under certain circumstances, counsel cannot be relieved without permission of the court, see United States v. Curry, 1848, 6 How. 106, 47 U.S. 106, 12 L.Ed. 363; Doggett v. Deauville Corp., 5 Cir., 1945, 148 F.2d 881; Lovvorn v. Johnston, 9 Cir., 1941, 118 F.2d 704, cert. denied 314 U.S. 607, 62 S.Ct. 92, 86 L.Ed. 488, there is no requirement of law or common sense that a court compel counsel to continue to represent a former client when there had been a termination of the attorney and client relationship before trial by mutual consent, which is what happened in this case.

Affirmed.

. Paragraph 3(s) of Count One of the indictment, to which appellant pleaded guilty, reads:

“On or about the 16th day of December, 1958, Samuel J. Smiley and Louis A. Schnider, on behalf of Charles Holdings, Inc., and Fred Tabah, on behalf of Pan American Investment Corporation, executed an agreement whereby Pan American Investment Corporation was to acquire from Charles Holdings, Inc., 200,-000 of the aforesaid one million shares for a purchase price of $183,000. To their knowledge the purchase price for said 200,000 shares was destined for Lowell M. Birrell.”