LeSAGE v. TITLE GUARANTEE & TRUST CO. et al.†
Should we consider and determine that the only respondent, Title Guarantee & Trust Company, a trust company for some purposes, an insurance company for others, would not have needed a permit to be able legally to issue the securities involved in this action, it would still leave causes of action stated against the respondent in the amended complaint which require us to reverse the judgment. We find it futile, therefore, to consider the proposition so ably presented, that the respondent did not need a permit to issue securities.
The judgment from which plaintiff's appeal is taken is one dismissing the causes of action numbered 1 to 43, inclusive, in the amended complaint, to which a demurrer had been sustained without leave to amend. The judgment disposing of the forty–fourth cause of action is not involved in this appeal. The forty–three causes of action represent as many purchases of beneficial interests in a trust established by the defendants as a means of financing and carrying on a project to improve and sell a real estate subdivision.
The amended complaint tells us that the defendants, other than respondent, furnished the consideration to some third parties for the conveyance of real estate to the respondent, who received it in trust. All the defendants executed a declaration of trust in which the respondent was named as trustee, the other defendants were recognized as beneficiaries. At the time the trust was created, the defendants, including the respondent, agreed and planned among themselves to offer, issue, and sell to the public beneficial interests to the extent of $300,000. For the purpose of facilitating the sale and issuance of these beneficial interests to the public, the defendants, not excluding the respondent, appointed and empowered five of their number as an executive committee to execute to each purchaser as evidence of his beneficial interest, a promissory note. The forty–three notes attached to the amended complaint as exhibits appear to have been executed by a majority or more of the executive committee, and recite that they promised, as an executive committee of the beneficiaries and not as individuals, to pay the amount of the note with interest, and that “an assignment of the beneficial interest” in the trust secured the payment. There is nothing on the face of the notes to indicate any liability or participation on the part of the respondent. The amended complaint further declares: “That from 1925 to 1930 all of the defendants in this action offered, issued and sold, or aided and participated in the offer, issuance and sale to the public including plaintiff's assignors herein, beneficial interests in said trust and all payments therefor were, according to an understanding between the defendants, made to and received by defendant Title Guarantee & Trust Company under said trust, and said executive committee for and on behalf and with the approval of all of the defendants executed to the respective purchasers of said beneficial interests its promissory notes hereinafter mentioned as evidence of said payment and the purchase of and interests as hereinafter related.”
No permit for the issuance or sale to any party of any right in the trust or its earnings had ever been granted by the commissioner of corporations.
In this case, as in Mary Pickford Company v. Bayly Brothers, Inc., 68 P.(2d) 239 (recently filed by us), it appears that the beneficial interests involved were securities which it was a fraud to sell contrary to the provisions of the Corporate Securities Act (Stats.1917, p. 673, as amended, Act 3814, Deering's General Laws 1923). In this case, as in the Pickford Case, the securities do not seem to have been the issue of the trustee, hence any power to act without a permit which it may have is not involved. But in this case we have that which we found lacking in the Pickford Case, the fact of the active co–operation and participation in the sale and issuance of the invalid securities on the part of the trustee.
We have concluded that the amended complaint, in its forty–three causes of action, alleges sufficient facts to reveal the respondent as a joint tort–feasor with the other defendants in the sale and issuance of securities which some of the other defendants were to and did issue, although they lacked the permit the law required of them. The demurrer to these causes of action should not have been sustained. Mary Pickford Company v. Bayly Brothers, Inc., supra.
The judgment is reversed. The appeal from the order sustaining defendant's demurrer is dismissed.
BISHOP, Justice pro tem.
We concur: YORK, Acting P. J.; DORAN, J.