Com. of Pennsylvania v. Freed

• Decision Date: 10 October 1932
• Docket Number: 109-1932
• Citation: 106 Pa.Super. 529,162 A. 679
• Parties: Com. of Pennsylvania v. Freed, Appellant
• Court: Pennsylvania Superior Court

162 A. 679

106 Pa.Super. 529

Com. of Pennsylvania v. Freed, Appellant

No. 109-1932

Superior Court of Pennsylvania

October 10, 1932

Argued April 18, 1932

Appeal by defendant from judgment of Q. S., Clearfield County September Sessions, 1931, No. 145, in the case of Commonwealth of Pennsylvania v. Harry M. Freed.

Trial of indictment charging the defendant with violating Act of April 13, 1927, P. L. 273. Before Chase, P. J.

The facts are stated in the opinion of the Superior Court.

Verdict of guilty upon which judgment of sentence was passed. Defendant appealed.

Error assigned, among others, was refusal of defendant's request to withdraw a juror.

Affirmed.

Edw. J Thompson, for appellant.

F. Cortez Bell, district attorney, for appellee.

Before Trexler, P. J., Keller, Gawthrop, Cunningham, Baldrige, Stadtfeld and Parker, JJ.

OPINION

Stadtfeld, J.

These were three indictments against Harry M. Freed for alleged violations of the Securities Act of 1927. The first indictment alleges that the defendant on March 3, 1931, being a salesman of securities, did unlawfully sell and offer for sale, contrary to said act of assembly, to one Matilda Kemp certain convertible debenture gold bonds of the Roxian Amusement Company, he, the said defendant, and it, the said Roxian Amusement Company, not being at the time registered with the Securities Commission of the Commonwealth as an agent, salesman and dealer authorized to sell securities of said company. The second count in the indictment alleges the unlawful solicitation of subscriptions to, and orders for said securities from the said Matilda Kemp. The second indictment alleges the violation by said defendant of the Securities Act, in that on March 3, 1931, he did solicit subscriptions to and orders from one Victor Johnson for similar securities under similar circumstances. The third indictment alleges that the said defendant violated the Securities Act in having on April 1, 1931, as salesman of securities, sold and offered to sell similar securities to one Henrietta Kephart. The second count in the indictment alleges that on that date, the defendant, as salesman of securities, solicited subscriptions to and orders for these securities from the said Henrietta Kephart.

The three indictments came to trial on September 14, 1931 before Chase, J., and resulted in a verdict of guilty. From the judgment entered and the sentence pronounced thereon against defendant, he has appealed to this court, alleging that the trial judge erred in overruling his motion to direct an acquittal, in refusing to withdraw a juror, in his charge to the jury, in refusing motion for new trial, in the admission of certain evidence and the answers to certain points.

At the same time as were tried the indictments against Freed, the defendant, there were also tried with them, three indictments against Charles Foltz, charging similar offenses arising out of, and in connection with the transactions charged against Freed.

The Securities Act is entitled, "An act for the registration and regulation of certain individuals and entities, selling, offering for sale or delivery, soliciting subscriptions to, or orders for, or undertaking to dispose of, inviting offers for, or inquiries about, or dealing in any manner in securities defined herein, including securities issued by them;" etc., etc.

By clause (c) of section 2 of the act it is provided that "The term, 'dealer' shall include every person or entity, other than a salesman who engages in this state, either for all or for part of his or its time, directly or through an agent, in selling, offering for sale or delivery, or soliciting subscriptions to, or orders for, or undertaking to dispose of, or to invite offers for, or inquiries about, or dealing in, any manner in any security or securities within this state, including securities issued by such entity."

It excepts, inter alia, from this definition, companies disposing of their own securities for their sole accounts in the following language, (8): "Wherein the issuer, a company organized under the laws of this state, or a company organized under other laws which has at least one-half of its paid in capital invested, employed or used in this state, disposes of its own securities, in good faith and not for the purpose of avoiding the provisions of this act, for the sole account of the issuer, without any commission or fee, and at a total expense of not more than three per centum of the proceeds realized thereon, and where no part of the issue is used directly or indirectly in payment for patents, services, good-will, or for property located outside of this state." By clause (d) it defines "salesman" as follows: "The term, 'salesman' shall except as provided in section four, (which section has no application to the facts in this case) include every person or company employed or appointed or authorized by a dealer to sell, offer for sale or delivery, or solicit subscriptions to or orders for, or dispose of inquiries about, or deal in any manner in, securities within this state, whether by direct act or through subagents."

By clause (f) of section 2, it defines "fraud;" "fraudulent;" "fraudulent practice" -- "The terms 'fraud,' 'fraudulent,' 'fraudulent practice,' shall include any misrepresentation, in any manner, of a relevant fact not made honestly and in good faith; any promise or representation or predication as to the future not made honestly and in good faith, or an intentional failure to disclose a material fact, the gaining, directly or indirectly through the sale of any security, of an underwriting or promotion fee or profit, selling or managing commission or profit so gross and exorbitant as to be unconscionable and fraudulent; and any scheme, device or other artifice to obtain such a profit, fee, or commission: Provided, however, That nothing herein shall limit or diminish the full meaning of the terms 'fraud' and 'fraudulent' as applied or accepted in courts of law or equity."

By section 3 of the act, under which the indictments were drawn, it is provided, inter alia, that "no salesman or agent shall, in behalf of any dealer, sell, offer for sale, tender for sale or delivery, or solicit subscriptions to or orders for, or dispose or undertake to dispose of, or invite offers for or inquiries about, any securities within this state, unless registered as a salesman or agent of a dealer under the provisions of this act," and by section 22, a violation of these provisions is made a misdemeanor. In section 10, provision is made for the registration of agents or salesmen upon the written application of a registered dealer, and for the issuing to them of registration certificates, and upon the application by the dealer the registration of an agent or salesman may be cancelled.

Under section 12, any registered dealer, and any person or company named in the registration certificate as an agent or salesman, may, in behalf of any dealer sell, offer for sale or solicit subscriptions to or orders for securities in this state.

Section 15 provides that the commission may require dealers to file lists, and prohibit sale of securities.

According to the testimony, it appears that the defendant had been employed as a salesman of D. Gleich and Company, dealers in securities, until the 16th day of March, 1931, when he turned in his registration card. His registration as such was cancelled on the 21st day of March, 1931. Daniel Gleich, who did business under the name of D. Gleich and Company, was called as a witness on behalf of the Commonwealth, and testified that his company never sold any of the securities of the Roxian Amusement Company, and that none of his salesmen, as salesmen of his company, were ever authorized to sell any securities of the Roxian Amusement Company.

The following excerpt from the charge of the trial judge correctly summarizes the testimony in relation to some of the transactions embodied in the indictments: . . . . "the Commonwealth produces several witnesses, some who testify that they bought bonds of the Roxian Amusement Company from the defendants, while others testified that they were solicited to buy these bonds by the defendants, this testimony of these witnesses is corroborated by the defendant Foltz, who took the stand and testified that on March the third or April the first, he having been a former employee of the Associated Gas and Electric Company in this district, but at that time working for the Roxian Amusement Company, as what he said was assistant manager to the manager of the theatre; that he had been sick, or had a hernia and was advised to go into the office, and while in the office, the other defendant, Mr. Freed, who, he said, was field surveyor (or one who goes to a place to determine the sites, whether it would be the proper place to locate a theatre) was coming up through this section. He made the offer to come up here that he knew this company had some stock or bonds which they desired to sell; that they came up here, and he, as a result of his employment with the Associated Gas and Electric Company knew that certain people held certain stock of the Associated Gas and Electric Company in this section; that he and Mr. Freed went into the Philipsburg section and the Moshannon section, and went to Mrs. Kemp, one of the women here who alleges she transferred or sold some of her stock for gold debenture bonds of the Roxian Amusement Company. He, (Foltz), introduced Mr. Freed who did the talking, and as a result of that talk with Mrs. Kemp, a widow lady seventy years of age, agreed to purchase $ 1,000 worth of these convertible, debenture gold bonds of the Roxian Amusement Company. Exhibit 'A' of the Commonwealth will show the terms agreed upon. She...