Smith v. Wait
| Decision Date | 29 December 1975 |
| Citation | 46 Ohio App.2d 281,350 N.E.2d 431 |
| Parties | , Blue Sky L. Rep. P 71,300, 75 O.O.2d 560 SMITH et al., Appellees, v. WAIT et al., Appellees, Gushman, Appellant. GUSHMAN, Appellant, v. STATE of Ohio, Appellee. |
| Court | Ohio Court of Appeals |
Syllabus by the Court
The state is not liable for the fraudulent registration of securities by its officers and employees, in violation of express statutory provisions.
Carlile, Patchen, Murphy & Allison and Robert C. Perrin, Columbus, for Dorothy C. Smith et al.
Knepper, White, Richards & Miller and Richard A. Frye, Columbus, for Hugh Wait et al.
Kyte, Conlan, Wulsin & Vogeler and Frederick J. McGavran, Cincinnati, for Richard W. Gushman.
William J. Brown, Atty. Gen., John R. Gall, William G. Compton, David J. Sherriff, Richard C. Brahm, and Nelson E. Genshaft, Columbus, for the state of Ohio.
The third-party plaintiff, Richard W. Gushman, appeals from a judgment of the Court of Claims dismissing his third-party complaint against the state of Ohio, and raises a single assignment of error, as follows:
'The Court of Claims erred in dismissing Mr. Gushman's third party complaint against the state of Ohio because the third party complaint states claims against the state in accordance with the same rules of law applicable to suits between private parties and the Court of Claims has jurisdiction over such claims.'
This action was originally commenced in the Court of Common Pleas of Franklin County, Ohio, with appellant Gushman named as one of the defendants. Gushman filed a third-party complaint against the state of Ohio, and the cause was removed to the Court of Claims, pursuant to R.C. 2743.03(E). The state filed a motion to dismiss the third-party complaint against it. The Court of Claims sustained this motion and remanded the cause to the Court of Common Pleas. It is from this judgment that the appeal is made.
Although the third-party complaint against the state is quite lengthy, the basic allegation thereof is that the state of Ohio, through its agents, registered fraudulent issues of securities of Ohio Real Estate Investment Company and Ohio Real Estate Equities Company, with knowledge of the fraud, and that such registration '* * * constitutes a warranty and a representation to the issuer and to purchasers of securities so approved that the business of the issuer is not fraudulently conducted, that the proposed offer or disposal of securities is not on grossly unfair terms, that the plan of issuance and sale of the securities referred to in the proposed offer or disposal would not defraud or deceive, or tend to defraud or deceive, purchasers, and that the issuer has complied with all relevant sections of the Ohio Revised Code. * * *' Gushman further avers that, as trustee of the issuers, he was induced by the knowingly false registration and knowingly false certification of the state of Ohio to approve the issues and offers of securities of the issuers.
Gushman makes similar allegations with respect to alleged fraudulent registration of preferred stock of U.S. Capital Corporation, alleging that, as a result of that fraudulent registration, Gushman, as trustee of Ohio Real Estate Investment Company was induced to approve the purchase of certain shares of U.S. Capital Corporation.
The state has waived its immunity from liability and consented to be sued in the newly-established Court of Claims by recently enacted R.C. 2743.02(A), which provides, as follows:
The state's waiver of its sovereign immunity from liability has not opened up the public coffers to all who may seek recompense but, rather, permits the liability of the state to be determined in accordance with the rules of law applicable to suits between private parties, no new claim for relief or right of action being created by the waiver of immunity. R.C. 2743.02(A) merely permits actions against the state to be brought which were previously barred by the doctrine of sovereign immunity, but such actions must be predicated upon previously recognized claims for relief, for which the state would have been liable except for sovereign immunity. Thus, the basic issue before this court is whether Gushman's third-party complaint states a claim upon which relief can be granted against the state. By a very well-reasoned opinion, the Court of Claims concluded that it does not. We agree.
R.C. 1707.09 requires that all securities, except certain enumerated exceptions, must be qualified in the manner provided in this section before being sold in this state. An application for qualification is to be made on forms prescribed by the division of securities. R.C. 1707.09(K) provides in part:
'* * * If the division finds that the business of issuer is not fraudulently conducted, that the proposed offer or disposal of securities is not on grossly unfair terms, that the plan of issuance and sale of the securities referred to in the proposed offer or disposal would not defraud or deceive, or tend to defraud or deceive, purchasers, and that division (J) of this section applies and has been complied with, then the division shall notify the applicant of its findings; and upon payment of a registration fee of one twentieth of one per cent of the aggregate price at which such securities are to be sold to the public in this state, which fee, however, shall in no case be less than twenty-five or more than five hundred dollars, the division shall register the qualification of such securities.'
Gushman's contention is that the division of securities registered the qualification of the securities involved, even though employees of the division knew that the requisite findings could not properly be made. R.C. 1707.09 does not in and of itself establish new civil liability upon anyone...
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