Strahan v. Pedroni, 24877.
| Decision Date | 12 December 1967 |
| Docket Number | No. 24877.,24877. |
| Citation | 387 F.2d 730 |
| Parties | Joe G. STRAHAN d/b/a Strahan Drilling Company and L. T. Murphy, Appellants, v. Frank A. PEDRONI et al., Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Marion R. Shepard, Jacksonville, Fla., for appellant, Mathews, Osborne & Ehrlich, Jacksonville, Fla., of counsel.
Robert S. Smith, Jacksonville, Fla., for appellees, Rogers, Towers, Bailey, Jones & Gay, Jacksonville, Fla., of counsel.
Before JONES and GODBOLD, Circuit Judges, and SCOTT, District Judge.
Appellees brought suit under the Federal Securities Act of 1933, 15 U.S. C.A. § 77a et seq., and under the Florida Sale of Securities Law, Florida Statutes, § 517.01 et seq., F.S.A., for rescission of a written contract whereby appellants agreed to sell certain fractional shares in gas wells to appellees in violation of the registration requirements of these Acts. Jurisdiction over the Federal Act is conferred by the Act itself. The court below properly found jurisdiction over the State Act to be pendent thereto. The lower court, in a non-jury trial, found that appellants were liable under both Acts. Appellees were awarded recovery of the amount paid for these fractional shares, less any earned income. Each appellee was also awarded interest, costs and attorney's fees.
For some 37 years before trial appellant Strahan had been engaged in the oil and gas business. Appellant Murphy had invested from time to time in various gas wells that had been drilled by Strahan. The record reveals, and the trial court found, that Strahan and Murphy joined in a business venture to sell certain fractional shares in various gas wells that had been drilled by Strahan. These shares, which were subsequently sold to appellees, are the subject of this suit.
During the latter part of 1963 Murphy went to Orange Park, Florida, for the purpose of selling these shares. While there he engaged one Carrol Nix to act as agent for Strahan and himself in their selling venture. The sales were made by appellants or their agent, Carrol Nix. Appellants Strahan and Murphy participated in and aided in making each of these sales to appellees. The initial offer to sell, in each instance, was made by appellants in the Middle District of Florida and the shares were delivered in that District. The sales were facilitated by the usage of the United States mails and other means involving interstate commerce.
Under the Securities Act of 1933, 15 U.S.C.A. § 77e, it is unlawful for any person to make use of any means of transportation or communication in interstate commerce or the mails to facilitate the sale of any "security", as defined by the Act. There is a similar prohibition under the Florida law against the sale of securities within the State of Florida, unless such securities are registered with the State Securities Commission. Under the provisions of both Acts, the buyer of an unregistered security may compel the rescission of the contract, rendering the seller liable to him for the purchase price, less the amount of any income received thereon, upon the tender of such security. Appellees have made such a tender. The purchaser is also entitled to recover his legal interest and costs. The Florida law also provides, in addition, for the recovery of attorney's fees to the purchaser's attorney.
It was stipulated by the parties at trial that the fractional shares in question constituted securities within the meaning of both the Federal and State Acts, and that these securities were unregistered at the time of sale. However, appellants claim a statutory exemption to the registration requirements of these Acts.
We find the defenses under the two Acts to be without merit, and hold that appellants have violated the registration provisions of both Acts.
Under Section 77d(1) of the Federal Act, the provision requiring registration of securities does not apply to transactions which do not involve a public offering. It...
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