Frederic J. TRUMP and Juliann S. Trump, husband and wife, Appellants,
H. S. BADET, Jr., Appellee.
[84 Ariz. 320] Darnell, Holesapple, McFall & Spaid, Tucson, for appellants.
Nolen L. McLean, Tucson, for appellee.
GORDON FARLEY, Superior Court Judge.
[84 Ariz. 321] H. S. Badet, Jr., plaintiff-appellee, sought to recover monies which he paid for the purchase of stock in two corporations upon the ground that the sales of such stock to him were in violation of the Arizona Securities Act. Frederic J. Trump et ux., defendants-appellants, contend that the plaintiff purchased a fifty per cent interest
in a business, rather than shares of stock as such, and that consequently the Securities Act has no application. The lower court determined that the Securities Act had been violated and entered judgment in favor of plaintiff, and this appeal followed.
The parties originally came in contact with each other through Attorney Frank E. Murphy, Jr., who was engaged by the defendants who, according to the terms of the employment contract:
'* * * being in need of additional capital for said corporation and also in need of additional executive assistance and desires to retain an attorney to locate same and to handle the transactions involved in obtaining new stock subscriptions, handling the various agreements and stock transfers attendant thereto, * * *.'
As a result of the attorney's efforts the plaintiff became interested, and to consummate the transaction the parties entered into a subscription agreement on April 20, 1953, which was subsequently modified orally, whereby the plaintiff agreed to acquire fifty per cent of the stock in two corporations known as Life Laboratories and Life Sales, both of which were originally incorporated by the defendants.
By the terms of the subscription agreement as orally modified, plaintiff acquired from defendants:
150 shares of stock in Life Laboratories for $15,000
15 shares of stock in Life Laboratories from one Fred Patterson for $1,500, and
60 shares of stock from Life Laboratories, a corporation, for $6,000, and
75 shares of stock from Life Sales, a corporation, for $7,500.
Neither of the corporations nor Patterson were made parties, but nevertheless the trial court rescinded the sale of all the foregoing stock, and directed the entry of a money judgment against the defendants for all of the stock purchased by plaintiff.
By defendants' first proposition it is urged that the parties were negotiating for the sale of fifty per cent interest in the business of the corporations, and merely chose the modus operandi of a stock transfer to effectuate the sale of the one-half interest in the business. It is admitted that plaintiff wanted to acquire at least a one-half interest in the business, but nevertheless plaintiff urges that the agreement which the parties concluded was a stock subscription agreement. Testimony was offered to [84 Ariz. 322] show that Murphy was employed to sell an interest in the business and to interest a purchaser who would assume some of the managerial duties, but the lower court apparently gave little weight to such testimony in the light of the language contained in Murphy's employment agreement to procure additional capital and in obtaining new stock subscriptions, as well as the agreement of April 20, supra, whereby plaintiff subscribed for shares of stock and wherein repeated reference is made to the subscription of stock by plaintiff, without mention of a business interest as such as ...