THE JOHNSON PUBLISHING CO. THE BEGINNING OF AN EMPIRE

The Legality of the "Straw Man" Acquisition: Johnson Publishing Co. and the Undisclosed Principal Doctrine under the Fair Housing Act

I. Preliminary Statement

The air in my office is stale today. It smells of old paper, cheap coffee, and the lingering ozone of the subway tracks running beneath the foundation. It is the scent of the grind. In the legal profession, practitioners like to pretend that the law is a pristine, intellectual exercise, a game of chess played on marble floors. It is not. It is a street fight in a dark alley where the person with the biggest stick usually wins.

Sometimes, however, the person with the stick is outmaneuvered by the person with the better map.

John H. Johnson’s acquisition of commercial real estate in 1949 Chicago is a masterclass in using the machinery of the law to defeat the spirit of the law, specifically the spirit of segregation. He utilized a Straw Man, a legal proxy, to bypass the racial prejudices that would have otherwise barred his entry into the downtown market.

This Legal Analysis analyzes the legal mechanics of that transaction, the status of the "Undisclosed Principal" doctrine, and how such a maneuver would be adjudicated under the modern Fair Housing Act of 1968. I will dissect the difference between "fraud" and "necessary obfuscation" in the face of systemic housing discrimination.

II. Definitions and Legal Framework

To proceed with rigor, I must define my terms. Words are the only weapons that do not leave bruises, but they can still cut deep.

A. The Straw Man

Black’s Law Dictionary (11th ed. 2019) defines a "straw man" or straw party as a nominal party to a transaction; one who acts as an agent for another for the purpose of taking title to real property and executing whatever documents and instruments the principal may direct respecting the property.

In the street vernacular of Chicago’s politics, a straw man is the guy you send through the door first to see if there is a tripwire. In 1949 Chicago, the tripwire was racism.

B. The Undisclosed Principal

This creates an agency relationship where the agent, the white lawyer, deals with a third party, the seller, who has no knowledge that the agent is acting for a principal, Johnson, let alone who the principal is. Under the Restatement (Third) of Agency § 6.03, when an agent acting with actual authority makes a contract on behalf of an undisclosed principal, the principal is a party to the contract unless excluded by the contract's terms.

III. The Fact Pattern: 1949 Chicago

The venue was Chicago, Illinois, a city segregated not by law (de jure) but by fact (de facto) and contract. The subject property was 1820 South Michigan Avenue, a prime piece of commercial real estate.

The players involved included the Principal, John H. Johnson, who was Black; the Agent, a white attorney whom historical records leave unnamed but whom I will refer to as Mr. X; and the Third Party, the white seller.

Regarding the transaction, Johnson knew the seller would not transfer title to a "Negro." This was not merely a hunch; it was the economic reality of the era. Property values were believed to plummet upon Black occupancy, a myth perpetuated by the Home Owners' Loan Corporation (HOLC) redlining maps.

Johnson hired Mr. X to approach the seller. Mr. X presented himself as the buyer. They negotiated the price. They drafted the contract. The seller believed he was conveying the property to a white attorney for his own use or investment.

On the day of the closing, Mr. X sat at the table. The papers were prepared. The seller signed the deed. It was only after the legal instrument was executed, transferring title to the name of the Trust or the entity controlled by Johnson, that Johnson walked into the room to shake hands. The seller was reportedly furious, realizing he had been "tricked" into integrating his own building. But the deed was done.

IV. Legal Analysis: The 1949 Context

Was this legal in 1949? Yes.

A. Shelley v. Kraemer, 334 U.S. 1 (1948)

Just one year prior, the U.S. Supreme Court ruled in Shelley that state courts could not constitutionally enforce racially restrictive covenants. These were clauses in deeds that said this property shall not be used or occupied by any person not of the Caucasian race.

The Court held that while private parties could voluntarily abide by these covenants, known as private discrimination, the judicial enforcement of them constituted "state action" violating the Equal Protection Clause of the 14th Amendment.

The loophole here was that the seller in Johnson's case was not relying on a covenant; he was relying on his own private right to refuse to sell. In 1949, a private seller could refuse to sell to anyone for any reason, except where specific state statutes might intervene, which was rare.

B. Validity of the Contract

The seller could have argued Fraud in the Inducement. The argument would be that he was induced to sign this contract by the misrepresentation of the buyer's identity.

The counter-argument is that in standard commercial real estate transactions, the identity of the buyer is generally considered immaterial unless the contract involves personal credit or personal skill, like painting a portrait. Money is fungible. The seller received the agreed upon price. The "loss" the seller claimed was the loss of the "right" to discriminate. Courts generally do not view the identity of the buyer as a material term in a cash land transaction unless explicitly asked and lied about. Even then, Johnson’s lawyer likely never said "I am not buying this for a Black man." He simply did not volunteer that he was. Silence is not fraud unless there is a duty to speak. In an arms length transaction, there is no duty to disclose the principal's race.

V. Modern Analysis: The Fair Housing Act

If John H. Johnson tried this today, the legal landscape shifts dramatically.

A. The Fair Housing Act (FHA) (Title VIII of the Civil Rights Act of 1968)

42 U.S.C. § 3604(a) makes it unlawful to refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

B. Is the "Straw Man" still necessary?

Ideally, no. If a seller refuses to sell to Johnson today because he is Black, Johnson has a direct cause of action under the FHA. He can sue for injunctive relief, forcing the sale, or for damages, both compensatory and punitive.

However, proving discrimination is difficult. Sellers hide behind excuses like "better offers" or claiming the property was "taken off the market." Therefore, "testers," which are essentially modern straw men, are frequently used by civil rights organizations to gather evidence.

C. Is the "Straw Man" tactic legal today?

Consider a hypothetical where a Black celebrity wants to buy a house in a gated community but fears the HOA will find a pretext to deny the application if they see his name. He hires a white lawyer to buy it as a trustee. The seller's perspective might be that they were lied to and wanted to know who their neighbor was.

The law states that the use of an undisclosed principal is still a valid principle of agency law. Unless the contract explicitly forbids assignment or requires the specific personal performance of the buyer, the undisclosed principal can enforce the contract.

The FHA twist is that if the seller attempts to void the contract upon discovering the buyer is Black, the seller effectively admits that race was a material factor in their decision. This is a confession of violating the FHA.

The law creates a paradox: The seller cannot claim they were defrauded by the concealment of a fact, race, that they are legally prohibited from considering. If a seller says, "I would not have sold if I knew he was Black," they are confessing to a federal crime or civil tort to justify voiding a contract. It is a legal suicide pact.

VI. The Ethics of Deception

The Legality of the "Straw Man" Acquisition: Johnson Publishing Co. and the Undisclosed Principal Doctrine under the Fair Housing Act

I. Preliminary Statement

The air in my office is stale today. It smells of old paper, cheap coffee, and the lingering ozone of the subway tracks running beneath the foundation. It is the scent of the grind. In the legal profession, practitioners like to pretend that the law is a pristine, intellectual exercise, a game of chess played on marble floors. It is not. It is a street fight in a dark alley where the person with the biggest stick usually wins.

Sometimes, however, the person with the stick is outmaneuvered by the person with the better map.

John H. Johnson’s acquisition of commercial real estate in 1949 Chicago is a masterclass in using the machinery of the law to defeat the spirit of the law, specifically the spirit of segregation. He utilized a Straw Man, a legal proxy, to bypass the racial prejudices that would have otherwise barred his entry into the downtown market.

This Legal Analysis analyzes the legal mechanics of that transaction, the status of the "Undisclosed Principal" doctrine, and how such a maneuver would be adjudicated under the modern Fair Housing Act of 1968. I will dissect the difference between "fraud" and "necessary obfuscation" in the face of systemic housing discrimination.

II. Definitions and Legal Framework

To proceed with rigor, I must define my terms. Words are the only weapons that do not leave bruises, but they can still cut deep.

A. The Straw Man

Black’s Law Dictionary (11th ed. 2019) defines a "straw man" or straw party as a nominal party to a transaction; one who acts as an agent for another for the purpose of taking title to real property and executing whatever documents and instruments the principal may direct respecting the property.

In the street vernacular of Chicago’s politics, a straw man is the guy you send through the door first to see if there is a tripwire. In 1949 Chicago, the tripwire was racism.

B. The Undisclosed Principal

This creates an agency relationship where the agent, the white lawyer, deals with a third party, the seller, who has no knowledge that the agent is acting for a principal, Johnson, let alone who the principal is. Under the Restatement (Third) of Agency § 6.03, when an agent acting with actual authority makes a contract on behalf of an undisclosed principal, the principal is a party to the contract unless excluded by the contract's terms.

III. The Fact Pattern: 1949 Chicago

The venue was Chicago, Illinois, a city segregated not by law (de jure) but by fact (de facto) and contract. The subject property was 1820 South Michigan Avenue, a prime piece of commercial real estate.

The players involved included the Principal, John H. Johnson, who was Black; the Agent, a white attorney whom historical records leave unnamed but whom I will refer to as Mr. X; and the Third Party, the white seller.

Regarding the transaction, Johnson knew the seller would not transfer title to a "Negro." This was not merely a hunch; it was the economic reality of the era. Property values were believed to plummet upon Black occupancy, a myth perpetuated by the Home Owners' Loan Corporation (HOLC) redlining maps.

Johnson hired Mr. X to approach the seller. Mr. X presented himself as the buyer. They negotiated the price. They drafted the contract. The seller believed he was conveying the property to a white attorney for his own use or investment.

On the day of the closing, Mr. X sat at the table. The papers were prepared. The seller signed the deed. It was only after the legal instrument was executed, transferring title to the name of the Trust or the entity controlled by Johnson, that Johnson walked into the room to shake hands. The seller was reportedly furious, realizing he had been "tricked" into integrating his own building. But the deed was done.

IV. Legal Analysis: The 1949 Context

Was this legal in 1949? Yes.

A. Shelley v. Kraemer, 334 U.S. 1 (1948)

Just one year prior, the U.S. Supreme Court ruled in Shelley that state courts could not constitutionally enforce racially restrictive covenants. These were clauses in deeds that said this property shall not be used or occupied by any person not of the Caucasian race.

The Court held that while private parties could voluntarily abide by these covenants, known as private discrimination, the judicial enforcement of them constituted "state action" violating the Equal Protection Clause of the 14th Amendment.

The loophole here was that the seller in Johnson's case was not relying on a covenant; he was relying on his own private right to refuse to sell. In 1949, a private seller could refuse to sell to anyone for any reason, except where specific state statutes might intervene, which was rare.

B. Validity of the Contract

The seller could have argued Fraud in the Inducement. The argument would be that he was induced to sign this contract by the misrepresentation of the buyer's identity.

The counter-argument is that in standard commercial real estate transactions, the identity of the buyer is generally considered immaterial unless the contract involves personal credit or personal skill, like painting a portrait. Money is fungible. The seller received the agreed upon price. The "loss" the seller claimed was the loss of the "right" to discriminate. Courts generally do not view the identity of the buyer as a material term in a cash land transaction unless explicitly asked and lied about. Even then, Johnson’s lawyer likely never said "I am not buying this for a Black man." He simply did not volunteer that he was. Silence is not fraud unless there is a duty to speak. In an arms length transaction, there is no duty to disclose the principal's race.

V. Modern Analysis: The Fair Housing Act

If John H. Johnson tried this today, the legal landscape shifts dramatically.

A. The Fair Housing Act (FHA) (Title VIII of the Civil Rights Act of 1968)

42 U.S.C. § 3604(a) makes it unlawful to refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

B. Is the "Straw Man" still necessary?

Ideally, no. If a seller refuses to sell to Johnson today because he is Black, Johnson has a direct cause of action under the FHA. He can sue for injunctive relief, forcing the sale, or for damages, both compensatory and punitive.

However, proving discrimination is difficult. Sellers hide behind excuses like "better offers" or claiming the property was "taken off the market." Therefore, "testers," which are essentially modern straw men, are frequently used by civil rights organizations to gather evidence.

C. Is the "Straw Man" tactic legal today?

Consider a hypothetical where a Black celebrity wants to buy a house in a gated community but fears the HOA will find a pretext to deny the application if they see his name. He hires a white lawyer to buy it as a trustee. The seller's perspective might be that they were lied to and wanted to know who their neighbor was.

The law states that the use of an undisclosed principal is still a valid principle of agency law. Unless the contract explicitly forbids assignment or requires the specific personal performance of the buyer, the undisclosed principal can enforce the contract.

The FHA twist is that if the seller attempts to void the contract upon discovering the buyer is Black, the seller effectively admits that race was a material factor in their decision. This is a confession of violating the FHA.

The law creates a paradox: The seller cannot claim they were defrauded by the concealment of a fact, race, that they are legally prohibited from considering. If a seller says, "I would not have sold if I knew he was Black," they are confessing to a federal crime or civil tort to justify voiding a contract. It is a legal suicide pact.

VI. The Ethics of Deception

There is a concept in the law called "Unclean Hands." It usually bars a plaintiff from seeking equitable relief if they have acted unethically regarding the subject of the lawsuit. Some might argue Johnson had "unclean hands" because he deceived the seller. I reject that premise.

When the system is rigged, when the "law" allows a seller to deny you shelter or commerce based on your bloodline, deception becomes a moral imperative. It is Self-Defense.

Johnson did not lie to steal; he lied to participate. He lied to gain entry to a room that was locked from the inside.

Black’s Law Dictionary does not have a definition for "Hustle," but if it did, it would reference John H. Johnson. He understood that in a blind justice system, sometimes you have to wear a mask to be seen.

VII. Conclusion

The "Straw Man" acquisition of 1820 South Michigan Avenue was a valid exercise of the Undisclosed Principal doctrine. It exploited the tension between contract law, which cares about cash, and social custom, which cared about color.

Today, while the Fair Housing Act provides a sword to strike down discriminatory sellers, the shield of the Straw Man remains a useful tool for privacy and security. But I must not forget that Johnson should not have needed a proxy. The fact that he did is an indictment of the era. The fact that it worked is a testament to his genius.

The rain has stopped. The city is quiet. I have a brief to write for a tenant on the west side.

Sincerely,

Matt Murdock, Esq

When the system is rigged, when the "law" allows a seller to deny you shelter or commerce based on your bloodline, deception becomes a moral imperative. It is Self-Defense.

Black’s Law Dictionary does not have a definition for "Hustle," but if it did, it would reference John H. Johnson. He understood that in a blind justice system, sometimes you have to wear a mask to be seen.

VII. Conclusion

The "Straw Man" acquisition of 1820 South Michigan Avenue was a valid exercise of the Undisclosed Principal doctrine. It exploited the tension between contract law, which cares about cash, and social custom, which cared about color.

Today, while the Fair Housing Act provides a sword to strike down discriminatory sellers, the shield of the Straw Man remains a useful tool for privacy and security. But I must not forget that Johnson should not have needed a proxy. The fact that he did is an indictment of the era. The fact that it worked is a testament to his genius.

The rain has stopped. The city is quiet. I have a brief to write for a tenant on the west side.

Sincerely,

Matt Murdock, Esq.