Bond v. Koscot Interplanetary, Inc.

• Decision Date: 02 April 1971
• Docket Number: No. 70-722,70-722
• Citation: 246 So.2d 631
• Parties: Blue Sky L. Rep. P 70,913 Marjorie BOND et al., Appellants, v. KOSCOT INTERPLANETARY, INC., a Florida corporation, Glenn W. Turner, individually and as Chief Executive Officer of Koscot Interplanetary, Inc., Alice Ann Turner and Fantastic, Inc., a Florida corporation, Appellees.
• Court: Florida District Court of Appeals

Page 631

246 So.2d 631

Blue Sky L. Rep. P 70,913

Marjorie BOND et al., Appellants, v. KOSCOT INTERPLANETARY, INC., a Florida corporation, Glenn W. Turner, individually and as Chief Executive Officer of Koscot Interplanetary, Inc., Alice Ann Turner and Fantastic, Inc., a Florida corporation, Appellees.

No. 70-722.

District Court of Appeal of Florida, Fourth District.

April 2, 1971.

J. Russell Hornsby of the Law Offices of J. Russell Hornsby, Orlando, for appellants.

Tanya M. Plaut and Gordon D. Simonds, Orlando, for appellees.

MAGER, Judge.

This is an appeal from an order entered by the trial court dismissing with prejudice plaintiffs-appellants' complaint. Defendants-appellees filed a motion to strike or in the alternative to dismiss plaintiffs' complaint substantially on the basis that the allegations therein did not state a cause of action. The trial court granted the motion to dismiss with prejudice due to the fact that plaintiffs orally announced their intention not to amend the complaint.

Before discussing the applicable principles relating to motions to dismiss we feel that it would not be inappropriate to observe that when a complaint is drawn in such a manner as to reflect a departure from the general principles of pleading and practice, the judicial labors become unnecessarily encumbered to the point that the substantive merits of the controversy are sometimes obscured. This situation can be avoided if due care is taken by the drafter so that the controversy can be resolved on the basis of substance rather than form.

In Russell v. Community Blood Bank, Inc., Fla.App.1966, 185 So.2d 749, 750, it is stated:

'* * * (T)hat a defendant moving to dismiss a complaint is deemed, for the purpose of ruling on the motion, to have admitted all facts well pleaded in the complaint, As well as all reasonable inferences arising from those facts. E. g., Jackson Tom, Inc. v. Carlton, Fla.App.1961, 133 So.2d 752.' (Emphasis added.)

In Rice v. White, Fla.App.1962, 147 So.2d 204, 207, it is likewise stated:

'Under our practice a motion to dismiss a complaint on the ground of failure to state a cause of action is addressed exclusively to the Allegations of the complaint, the well-pleaded allegations being assumed to be true for the sole purpose of determining the validity of the motion. In other words, the court determines whether the plaintiff, if he later proves the allegations of his complaint, would thereby establish a cause of action against the defendant.' (Emphasis added.)

In Lytell v. McGahey Chrysler-Plymouth, Inc., Fla.App.1965, 180 So.2d 354, 355, citing Regan v. Davis, Fla.App.1957, 97 So.2d 324, it has been held that:

'If a complaint states a cause of action upon Any ground, a motion to dismiss the complaint for failure to state a cause of action should be denied. * * *' (Emphasis added.)

With these principles in mind we now turn to the allegations in plaintiffs' complaint to ascertain whether they are salvageable to such extent that justice requires a determination that a cause of action exists. Plaintiffs' complaint embodies four counts or causes of action: (1) rescission of contract; (2) recovery of purchase price for securities sold in violation of state security acts; (3) conspiracy, and (4) motion to enforce consent decree or in alternative for contempt. With regard to Count No. 1, defendants' motion to dismiss asserts that the allegations therein 'do not state a cause of action against defendants because there is no basis in law for rescission of contract under the facts as therein alleged even if all the facts were true'. In setting up the first cause of action plaintiffs allege the existence of 'contracts with Koscot Interplanetary, Inc., a Florida corporation, which are attached hereto marked Exhibits 1 through 17 and made a part hereof by reference * * *'.

Rule 1.130, F.R.C.P., 30 F.S.A., states 'Any exhibit attached to a pleading shall be considered a part thereof for All purposes'. Exhibits 1 through 17 contain, in part, 'Distributor Application and Agreements' allegedly signed by several of the plaintiffs by virtue of which they are apparently authorized to function as wholesale distributors for the sale of Koscot cosmetic products.

Other allegations in support of Count 1 are as follows: a description of the method by which distributorships or franchises are alleged to be sold; assertions that the profit to be made by a distributor 'lies not in the sale of cosmetics but in the securing of other distributors under this distributor' with a 'commission or finder's fee to be paid' by Koscot to each distributor for each subsequent distributor recruited; a description of the various levels in a distributorship plan with persons at each level receiving a 'commission or finder's fee for each person recruited; ¹ an assertion that 'the scheme or plan as being operated and being promoted by Koscot', (described in the complaint) 'is believed to be and therefore alleged to be violative of Section 849.091, Florida Statutes, F.S.A.'; an assertion 'that such contracts are void because they are contrary to the established public policy of the state'. Plaintiffs in their prayer for relief assert that 'the court should void the contract herein attached' and 'return all monies paid for directorships and supervisors to the plaintiffs'.

Irrespective of the deficiencies in draftsmanship, applying all reasonable inferences to the allegations in Count 1 as well as the exhibits attached thereto, we must conclude that a cause of action exists against Koscot only. In their motion to dismiss defendants have admitted for the purposes of such motion: that the plaintiffs 'had contracts with Koscot'; that the method by which such distributorships are granted and the plan of Koscot's operation is as described in the complaint and attachments. While these allegations, although admitted by defendants, do not state a cause of action to support rescission, the allegations of the complaint appear to state a cause of action on other grounds, namely, the voiding of a contract on the basis that it violates a statute or is against public policy and, accordingly, the motion to dismiss should be denied. ² See Lytell v. McGahey Chrysler-Plymouth, Inc., supra, and Regan v. Davis, supra.

Defendants' admissions are 'solely for the purpose of determining, if the allegations are proven, whether there would be established a cause of action against the defendants'. See Rice v. White, supra. See also Yoo Hoo of Florida Corp. v. Catroneo, Fla.App.1965, 175 So.2d 220. If the plaintiffs are able to prove that the method and alleged scheme as described in their complaint constitutes a pyramid or lottery as prohibited by Section 849.091, the contract embodying such scheme or plan would be unenforceable and void. M. Lippincott Mortgage Investment Co. of Fla. v. Childress, Fla.App.1967, 204 So.2d 919; Florida Discount Centers, Inc. v. Antinori, Fla.App.1969, 226 So.2d 693; Florida Discount Centers, Inc. v. Antinori, Fla.1970, 232 So.2d 17; Local No. 234, etc. v. Henley & Beckwith, Inc., Fla.1953, 66 So.2d 818; 7 Fla.Jur., Contracts §§ 59-72; and 17 Am.Jur.2d, Contracts, §§ 165-180, 216-240.

The foregoing citations indicate the broad general rule that an agreement which violates a statute or is contrary to public policy is illegal, void and unenforceable as between the parties. In Lippincott, the First District held that as a matter of law a certain transaction involving the promotion and sale of vacuum cleaning systems, which formed the basis of promissory notes upon which suit was maintained, constituted a lottery rendering the note void and unenforceable. In the Florida Discount Centers case the Supreme Court of Florida in approving the decision of the Second District Court held that a scheme whereunder purchasers of products might earn commissions Upon the recruitment of other purchasers constituted a pyramid club under the facts before the court and was in contravention of Section 849.091.

With regard to the plaintiffs' cause of action or Count 2 for the 'recovery of the purchase price of securities sold in violation of state security act', we are also of the opinion that if the plaintiffs prove the allegations set forth in their complaint a cause of action would be established against Koscot. In support of Count 2, plaintiffs assert, inter alia, that these Contracts (with Koscot) 'were securities under the security laws of the State of Florida', 'were not and are not within any exemption' and such sale was 'in violation of the provisions of the security laws'. The Florida Securities Law prohibits the sale of 'securities' except those exempt unless such security shall have been registered within the meaning of the law (Sections 517.02(1), 517.07, F.S.A.). Section 517.21(1) declares that 'every sale made in violation of the provisions of this chapter shall be voidable at the election of the purchaser'. ³ If the plaintiffs are successful in establishing that the contracts in question are 'securities within the meaning of Chapter 517' then under the decision in Florida Discount Centers, Inc., supra, such transaction would be violative of the law. ⁴ In this regard the Second District Court of Appeal observed, in part, 226 So.2d at p. 695:

'* * * The entire scheme is ingenious, but clearly directed toward the possibility of gain. We hold the founders' contracts to be 'interests in or under a profit-sharing or participation agreement or scheme' within the meaning of § 517.02(1) for the reason given by Mr. Justice Murphy in Howey just following the passage relied upon by the appellant: 'The statutory policy of affording broad protection to investors is not to be thwarted by unrealistic and irrelevant formulae.' (S.E.C. v. W. J. Howey Co.) 328 U.S. (293) at 301, 66 S.Ct. (1100) at 1104 (90 L.Ed. 1244).'

With regard to plaintiffs' Count 3 alleging a 'conspiracy' we are of the opinion that the allegations fail to state a cause of action....