T. McKeen Chidsey, Attorney General, Charles M. Willits, Special Deputy Attorney General, Harrisburg, H. F. Stambaugh, Special Counsel, William S. Rahauser, District Attorney, Marjory H. Matson, Assistant District Attorney, Pittsburgh, for appellant.
Joseph A. Rossi, Max V. Schoonmaker, Pittsburgh, for appellees.
Before Rhodes, P. J., and Hirt, Reno, Dithrich, Ross and Fine, JJ.
[ 166 Pa. Super. Page 276]
These appeals are from an order quashing an indictment which charged the defendants, and Petroleum Drilling Corporation, with selling securities as dealers or salesmen without having registered with the Securities Commission of Pennsylvania, in violation of the Act of June 24, 1939, P.L. 748, as re-enacted and amended by the Act of July 10, 1941, P.L. 317, 70 P.S. § 31 et seq. The 'security' alleged to have been sold in each of the nine counts of the indictment is described as 'a one-thirty-second fractional undivided interest in oil, gas and other mineral rights, namely, a one-thirty-second working interest in and to the net proceeds from the sale of any oil and gas which shall be produced and marketed from the Deming Well Number II [or Deming Well III] situate in Washington Township, Tuscarawas County, in the State of Ohio * * *.'
The court quashed the indictment on the ground that the 'working interest' in the proceeds of oil and gas alleged to have been sold in each instance was not a
[ 166 Pa. Super. Page 277]
'security' within the definition of the Pennsylvania Securities Act, supra, and therefore no offense in violation of it, was charged.
Section 3 of the Pennsylvania Securities Act, supra, 70 P.S. § 33, provides that no dealer or salesman of such dealer shall sell any security in this State unless registered in accordance with the Act. Violation in this respect is made a misdemeanor by § 22, 70 P.S. § 52. Section 2, 70 P.S. § 32, defines a security in this language: 'The following terms shall, unless the context otherwise indicates, have the following respective meanings: (a) 'Security.' The term 'security' means any bond, stock, collateral trust certificate, transferable share, investment contract, certificate under a voting trust agreement, treasury stock, note, debenture, certificate in or under a profit sharing or participation agreement, subscription or preorganization certificate, fractional undivided interest in oil, gas, or other mineral rights, evidence of indebtedness, certificate of deposit for a security, certificate or instrument representing or secured by an interest in the capital assets or property of any company, other instrument commonly known as a security, or certificate or interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. * * *' (Italics added.) There is merit in this, the Commonwealth's appeal. In our view the subject matter of the sale as charged in each court was a security within the prohibition of the Act. The order will be reversed.
It is only the penal provisions of a law that must be strictly construed. Statutory Construction Act of May 28, 1937, P.L. 1019, Art. IV, § 58, 46 P.S. § 558. And courts may put a literal construction on a penal clause and a liberal construction on a remedial clause in the same statute. Commonwealth v. Shaleen, 215 Pa. 595, 64 A. 797; Alford v. Raschiatore, 163 Pa. Super. 635,
[ 166 Pa. Super. Page 27863]
A.2d 366. The Pennsylvania Securities Act is remedial legislation. Its primary purpose is to protect the investing public. The Act contemplates an investigation to determine whether the securities are being offered to the public honestly and in good faith without any intent to deceive or defraud. Commonwealth v. Summons, 157 Pa. Super. 95, 41 A.2d 697. That part of the Securities Act therefore which specifies classes of investments which are within the contemplation of the legislation, is to be liberally construed. And the clear intent of the Act is not to be defeated by a too literal reading of words without regard to their context and the evils which the Act clearly was designed to correct. Even the canon of strict construction of a penal statute is not an inexorable command to override common sense and evident statutory purpose. As was said in United States v. Gaskin, 320 U.S. 527, 530, 64 S.Ct. 318, 319, 88 L.Ed. 287: the canon 'does not require distortion or nullification of the evident meaning and purpose of the ...