Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

OXFORD FIN. COS. v. HARVEY

November 25, 1974

OXFORD FINANCE COMPANIES, INC. and OXFORD PREMIUM SALES CORP. and COMMONWEALTH FINANCIAL CORP.
v.
WALTER B. HARVEY, JR. and EDITH S. HARVEY and JAMES R. CHAMBLESS and SOUTH CENTRAL OIL AND DEVELOPMENT CORPORATION and HARVEY'S INTERNATIONAL, INC. and WALTER HARVEY CORPORATION and KOHLMEYER and COMPANY



The opinion of the court was delivered by: LORD, III

 JOSEPH S. LORD, III, CH. J.

 On October 19, 1973, Oxford Premium Sales Corp. ("Oxford") and South Central Oil and Development Corp. ("South Central") entered into a Joint Venture Agreement "for the improvement of a certain parcel of real property situated in Key West, Florida." (Joint Venture Agreement, p. 1). The Agreement was amended on November 13, 1973. The relationship soured and plaintiffs *fn1" subsequently instituted this action alleging (1) breach of the Agreement, its amendment, and a Surety Agreement also executed on November 13, 1973 (Counts I and II); (2) common law fraud (Count III); and (3) violations of the federal securities laws (Count V). All defendants except Kohlmeyer and Co. have moved to dismiss Count V, asserting that no "security" was involved in the transactions between plaintiffs and defendants. We agree.

 Count V sets forth alleged examples of willful misrepresentations made by defendants concerning their financial condition, on which plaintiffs claim to have relied in deciding to enter the venture. Plaintiffs assert that this alleged conduct transgressed § 17 of the Securities Act of 1933 ("'33 Act"), 15 U.S.C. § 77q, § 10(b) of the Securities Exchange Act of 1934 ("'34 Act"), 15 U.S.C. § 78j(b), and Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 210.10b-5. Collectively, these provisions prohibit fraud, material misrepresentation, or deception in the purchase or sale of a "security".

 Section 2(1) of the '33 Act, 15 U.S.C. § 77b (1) provides in pertinent part:

 
"* * * unless the context otherwise requires --
 
"(1) The term 'security' means any note, * * * evidence of indebtedness, * * * investment contract, * * * or, in general, any interest or instrument commonly known as a 'security' * * *."

 (Emphasis added.)

  The '33 Act definition is "virtually identical to that contained in the 1934 Act", *fn2" TCHEREPNIN v. KNIGHT, 389 U.S. 332, 336, 19 L. Ed. 2d 564, 88 S. Ct. 548 (1967), and therefore "* * * whether the question of what is a security arises under the 1933 Act or the 1934 Act, the test to be applied is identical." WASNOWIC v. CHICAGO BOARD OF TRADE, 352 F. Supp. 1066, 1070 (M.D. Pa. 1972), aff'd. 491 F.2d 752 (C.A. 3, 1974). In interpreting these definitions "* * * we are guided by the familiar canon of statutory construction that remedial legislation should be construed broadly to effectuate its purposes." TCHEREPNIN v. KNIGHT, supra, 389 U.S. at 336. The definitional sections list many common documents, and "[instruments] may be included within any of these definitions, as a matter of law, if on their face they answer to [a listed] name or description." S.E.C. v. C. M. JOINER LEASING CORP., 320 U.S. 344, 351, 88 L. Ed. 88, 64 S. Ct. 120 (1943). On the other hand, Congress has specifically directed that the context of a transaction must be given precedence over the label attached to a particular instrument. AVENUE STATE BANK v. TOURTELOT, 379 F. Supp. 250, 253 (N.D. Ill. 1974). "[Form] should be disregarded for substance and the emphasis should be on economic reality." TCHEREPNIN v. KNIGHT, supra, at 336. With these principles in mind we shall examine the documents alleged by plaintiffs to constitute "securities."

 A. The Joint Venture Agreement of October 19, 1973, and as amended on November 13, 1973

 Plaintiffs argue that the Joint Venture Agreement and its amendment constitute an "investment contract." In S.E.C. v. W. J. HOWEY CO., 328 U.S. 293, 298-299, 90 L. Ed. 1244, 66 S. Ct. 1100 (1946), the Court defined "investment contract" as

 
"* * * a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party."

 While some courts have interpreted the word "solely" in its most narrow sense, see, e.g., MR. STEAK, INC. v. RIVER CITY STEAK, 460 F.2d 666 (C.A. 10, 1972); aff'g. 324 F. Supp. 640 (D.Colo. 1970), the Third Circuit has adopted a more elastic approach.

 
"* * * [An] investment contract can exist where the investor is required to perform some duties, as long as they are nominal or limited and would have 'little direct effect upon receipt by the participant of the benefits promised by the promoters.'" LINO v. CITY INVESTING CO., 487 F.2d 689 (C.A. 3, 1973), citing Securities Act Release No. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.