Florida Discount Centers, Inc. v. Antinori, s. 68-416

• Decision Date: 06 June 1969
• Docket Number: Nos. 68-416,68-417,s. 68-416
• Citation: 226 So.2d 693
• Parties: Blue Sky L. Rep. P 70,820 FLORIDA DISCOUNT CENTERS, INC., a Florida corporation, et al., Appellants, v. Paul ANTINORI, Jr., etc., et al., Appellees. FLORIDA DISCOUNT CENTERS, INC., a Florida corporation, et al., Appellants, v. STATE of Florida, by Fred O. DICKINSON, Jr., Comptroller; Earl Faircloth, Attorney General, and Broward Williams, State Treasurer, as and constituting the Florida Securities Commission, Appellees.
• Court: Florida District Court of Appeals

Page 693

226 So.2d 693

Blue Sky L. Rep. P 70,820

FLORIDA DISCOUNT CENTERS, INC., a Florida corporation, et al., Appellants, v. Paul ANTINORI, Jr., etc., et al., Appellees.

FLORIDA DISCOUNT CENTERS, INC., a Florida corporation, et al., Appellants, v. STATE of Florida, by Fred O. DICKINSON, Jr., Comptroller; Earl Faircloth, Attorney General, and Broward Williams, State Treasurer, as and constituting the Florida Securities Commission, Appellees.

Nos. 68-416, 68-417.

District Court of Appeal of Florida, Second District.

June 6, 1969.

Rehearing Denied Oct. 15, 1969.

William R. McCown and Robert H. Carlton, Tampa, for appellants.

Earl Faircloth, Atty. Gen., Tallahassee, William D. Roth, Asst. Atty. Gen., Lakeland, and Milton J. Wallace, Asst. Atty. Gen., Miami, for appellees.

MANN, Judge.

Purchase at a cost of $320 of either a sewing machine and accessories or a set of aluminum cookware, both said to be 'nationally advertised' at a price in excess of $300, but either of which is purchased by appellant for less than $70, makes one a 'founder' eligible to earn $60 upon recruitment of each founder subsequently persuaded. When the maximum of 3000 'founders' have joined, or sooner if the appellant were to deem it practicable, a 'discount' store would be opened, capital for the venture coming from a portion of the money paid in by the founders, who would thereafter earn commissions on sales to the 100 families whose names were to be supplied by each founder. It is the appellants' contention, to simplify, that the imposition of a maximum of 3000 participants prevents this scheme from being a pyramid club forbidden by Florida Statutes 849.091, F.S.A. and that the requirement that the founders provide the names of customers for the 'discount' store and keep them as active customers there removes the scheme from the registration requirements of the securities law. Florida Statutes c. 517 (1967), F.S.A.

To the credit of Mr. Carlton, president and counsel of appellant, a full disclosure of the circumstances was made and there was no effort in Florida, as there was in a similar Alabama case, to submit the case on agreed facts. Testimony was taken which convinced the trial judge that the persons who signed up as founders were not interested in a three-hundred dollar sewing apparatus or in a set of cookware, but in the possibility of profit.

Judge Wigginton has explained in M. Lippincott Mortgage Investment Co. of Florida, Inc. v. Childress, Fla.App.1968, 204 So.2d 919, why schemes of this nature contravene the law against chain letter and pyramid clubs. We need add only that the imposition of a ceiling does not cure the evil in the situation found by the trial judge to exist.

The securities law violation is more complex and appellant relies understandably on Gallion v. Alabama Market Centers, Inc., 282 Ala. 679, 213 So.2d 841 (1968). The scheme here involved is essentially that of the corporation which the Supreme Court of Alabama held had not violated Alabama's similar securities law, and is set forth fully in the opinion. Appellant is also comforted by dicta in S.E.C. v. W. J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946) and McElfresh v. State, 1942, 151 Fla. 140, 9 So.2d 277. In McElfresh our Supreme Court stated that the determinative factors as to whether an agreement is a security are the purpose of reaping a profit and that the extent of the profit is to be gauged by the efforts of the vendor. In the Howey case, the Supreme Court of the United States held the sale of small tracts of land making up citrus groves the sale of securities under the federal act. The opinion stated that the test...