Wogahn v. Stevens
Decision Date | 08 November 1940 |
Citation | 236 Wis. 122,294 N.W. 503 |
Parties | WOGAHN v. STEVENS et al. |
Court | Wisconsin Supreme Court |
OPINION TEXT STARTS HERE
Appeal from an order and a judgment of the Circuit Court for Dane County; Alvin C. Reis, Circuit Judge.
Affirmed.
This action was begun on October 19, 1938, by Lester E. Wogahn, Trustee, plaintiff, against W. F. Stevens, L. C. George, E. C. Holt, B. E. Buckman, P. A. Sletteland, Fred Kellogg, Ray Linehan, Verne B. Houghton, Fay Elwell and Benjamin Kiekhofer, defendants, to recover under the provisions of U.S.Code Ann. Title 15, 77k, commonly known as the Securities Act. The defendants, Elwell, Kiekhofer, Kellogg, Houghton and Linehan, demurred to the complaint on the following grounds:
(1) That the plaintiff has not the legal capacity to sue.
(2) That several causes of action have been improperly united.
(3) That said complaint does not state facts sufficient to constitute a cause of action. And
(4) That the action was not commenced within the time limited by law, to-wit, Section 77m, Title 15 U.S.C.A.
The trial court sustained the demurrer on the ground that the trustee does not have the legal capacity to sue upon the present cause of action and directed judgment dismissing plaintiff's complaint. Judgment was entered accordingly on the 9th day of March, 1940. The plaintiff appeals from the order sustaining the demurrer and from the judgment.
The facts will be stated in the opinion.
R. van Wolkenten, of Madison, and Harry J. Allen, of Milwaukee, for appellant.
Wilkie, Toebaas, Hart, Kraege & Jackman, of Madison, for respondents.
It is not necessary to state in detail all of the facts set out in the plaintiff's complaint in order to dispose of the questions raised on this appeal.
Sec. 77k(a), Title 15 U.S.C.A., entitled “Civil liabilities on account of false registration statement”, is set out in the margin.1
In the complaint it is alleged that the plaintiff was appointed trustee for forty-five named persons who were purchasers of the common stock of the Continental Service Company, hereinafter called company, and that said named persons had assigned and conveyed such common stock to the plaintiff as trustee under a trust agreement, a copy of which is attached to the complaint; that the defendants, W. F. Stevens, L. C. George, E. C. Holt, B. E. Buckman and P. A. Sletteland, were the organizers and promoters of said corporation; that W. F. Stevens was a member of the board of directors and president; that L. C. George was at all times mentioned in the complaint a member of the board of directors and the vice-president and general manager; that E. C. Holt was a member of the board of directors and secretary-treasurer; that B. E. Buckman was a member of the board of directors of the said company; that P. A. Sletteland was a member of the board of directors and for a time president of the company; that the defendants, Kellogg, Linehan, Houghton, Elwell and Kiekhofer, are public accountants practicing the same under the firm name and style of Elwell, Kiekhofer & Company, and held themselves out to the public as a firm of certified public accountants.
It is further alleged that on the 28th day of March, 1936, the company filed with the Securities Exchange Commission at Washington a registration statement; that thereafter the aforementioned directors caused 11,084 shares of the common stock of the company to be sold to the several named stockholders for $55,420.
It is further alleged that a certain item relating to processing taxes contained in said registration statement was untrue and false; that said false item appears in the statement prepared by Elwell, Kiekhofer & Company and certified to by them as being correct and accurate; that the falsity of the statement contained in the registration statement was discovered about December 1, 1937, and-“That by virtue of the facts hereinbefore alleged and by virtue of the provisions of the Securities Act of 1933, as amended [15 U.S.C.A. § 77a et seq.], the above named defendants are jointly and severally liable to this plaintiff for the amount of the difference between the amount paid for the said common stock of Continental Service Company and the value thereof at this time; that the value of the common stock of Continental Service Company at this time is nothing, and that the defendants are therefore jointly and severally liable to this plaintiff for the amount of the full purchase price of the aforesaid stock.”
The first paragraph in the trust agreement is as follows: “In consideration of one dollar in hand paid by Lester E. Wogahn to the undersigned, and for other and valuable consideration, receipt whereof is hereby acknowledged, the undersigned do herewith bargain, sell, assign, transfer and convey to Lester E. Wogahn, hereinafter referred to as the Trustee, in trust for the undersigned, the following described securities:” etc.
It will be noted under the allegations of facts contained in the complaint that Wogahn is not a purchaser of the stock but is an assignee of the claims if any which each of the several stockholders have against the several defendants. Attention is called to this fact by reason of the language contained in sec. 77k(a), to the effect that “any person acquiring such security *** may, either at law or in equity, in any court of competent jurisdiction, sue-” etc.
Plaintiff makes no claim that he holds as a purchaser of the stock. It appears from the allegations that he paid only $1, a purely nominal consideration for the transfer to him of the claims of the various stockholders.
It is contended here on behalf of the defendants that claims arising under this section are not assignable. It is conceded that there is no federal statute changing the rule of survivability as it existed at common law. U.S.C.A. Title 28, § 778. The survivability of the right of action created by act of Congress must be determined in accordance with federal law and not the law of the state where the cause of action arose. In Michigan Central Ry. Co. v. Vreeland, 1913, 227 U.S. 59, 69, 33 S.Ct. 192, 194, 57 L.Ed. 417, Ann.Cas.1914C, 176, the question involved was whether a claim under the federal liability act survived. The court said:
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