{
  "id": 3341982,
  "name": "Henry W. Fuchs et al., Plaintiffs in Error, v. David H. Daskal et al., Defendants in Error",
  "name_abbreviation": "Fuchs v. Daskal",
  "decision_date": "1927-03-29",
  "docket_number": "Gen. No. 31,189",
  "first_page": "107",
  "last_page": "112",
  "citations": [
    {
      "type": "official",
      "cite": "244 Ill. App. 107"
    }
  ],
  "court": {
    "name_abbreviation": "Ill. App. Ct.",
    "id": 8837,
    "name": "Illinois Appellate Court"
  },
  "jurisdiction": {
    "id": 29,
    "name_long": "Illinois",
    "name": "Ill."
  },
  "cites_to": [],
  "analysis": {
    "cardinality": 401,
    "char_count": 7876,
    "ocr_confidence": 0.526,
    "sha256": "7fe244918ed3b3c6ad5397cc1dc0154c727f5ed5a6be2851aecd9554d65d757d",
    "simhash": "1:03c4c6fdaafa330e",
    "word_count": 1354
  },
  "last_updated": "2023-07-14T19:23:28.054403+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
  },
  "casebody": {
    "judges": [],
    "parties": [
      "Henry W. Fuchs et al., Plaintiffs in Error, v. David H. Daskal et al., Defendants in Error."
    ],
    "opinions": [
      {
        "text": "Mr. Justice Pitch\ndelivered the opinion of the court.\nA general demurrer was sustained to complainants\u2019 amended bill, filed under section 37 of the Illinois Se'curities Law, Cahill\u2019s St. ch. 32, 270, and the complainants electing to stand by it, their amended bill was dismissed for want of equity. The question presented by this writ of error is whether the facts stated in the amended bill and admitted by the demurrer constitute a sale of securities in violation of that law.\nIt is alleged in the amended bill that the Bong Battery Corporation, a Delaware corporation, with \u00e1 capital stock consisting of 100,000 shares of the par value of $10 each, issued 50,000 shares thereof in exchange for patent rights, good \"will, promotion fees, and other intangible assets, and that on March 23, 1923, the owners of said 50,000 shares deposited the certificates representing the same in escrow with the Century Trust & Savings Bank, a depository designated by the secretary of state, as owners of such stock are required to do by section 12 of the Securities Act, Cahill\u2019s St. ch. 32, jf 265; that the escrow agreement, a copy of which is attached to the bill as an exhibit, contains the provisions specified in section 12 of the Securities Act and the further provisions that said stock \u201cwill not participate in any dividends which may be declared or paid, unless and until such securities are qualified in Class \u2018C\u2019 under the Illinois Securities Law,\u201d and that said securities \u201cshall not be sold nor transferred directly or indirectly during the time said securities remain on deposit with the above named trustee, but that such deposit of such securities shall not affect the voting powers of the owners of such securities\u201d; that the defendants David H. Daskal, George H. Daskal and David Davis each deposited 7,500 shares; that at the time of such deposit, they \u201cwere the owners of said 22,500 shares\u201d and \u201ccontinued to own same\u201d until March 1, 1924, when they sold \u201ctheir interest in and to said 22,500 shares\u201d to the complainants for $13,000, of which sum five of the six complainants and eight of the thirteen defendants contributed specified amounts.\nThe bill further alleges that on April 12, 1923, the Bong Battery Corporation filed with the secretary of state a statement \u201cin compliance with Paragraphs 1 and 13 of Section 9\u201d of the Illinois Securities Law, signed by the defendant David H. Daskal as president, and David Davis as treasurer, in which it was stated \u201cthat it was proposed to issue and offer for sale a total of 40,000 shares\u201d of the stock of that corporation, of which \u201cit was proposed to offer for sale in the State of Illinois\u201d 20,000 shares; that said stock was \u201cthen in the treasury\u201d of said corporation, and that under the Illinois law \u201csaid 20,000 shares of said treasury stock of said Bong Battery Corporation was the only stock that said defendants or said corporation were legally entitled to sell in the State of Illinois under the statement and information filed\u201d by them with the secretary of state; that the 22,500 shares of stock sold to complainants \u201cwas not Treasury Stock and was not the stock referred to in the statement and information filed\u201d with the secretary of state, and it was therefore unlawful to sell \u201cany part or portion of the stock deposited in escrow\u201d; that the \u201csales\u201d thereof to complainants \u201cwere a violation of section 36 of said act\u201d and prima facie evidence of fraud; that complainants have elected to rescind the same, and therefore tender to the sellers \u201call interest in said escrow stock transferred\u201d by them and demand the return of the consideration paid therefor. The bill prays that said \u201csales\u201d be declared void and that defendants be required \u201cto accept the assignments of interest in and to said escrow stock\u201d and to pay back the sum paid therefor, together with reasonable attorneys\u2019 fees.\nSections 9, 12 and 36 of the Securities Law, Cahill\u2019s St. eh. 32, \u00b6\u00b6 262, 265, 289, mentioned in the bill and cited and relied on in complainants\u2019 brief, refer in terms to Class D securities only. Section 9 forbids the sale of any security in Class D until certain \u201cstatements and documents\u201d are filed in the office of the secretary of state. Section 12 provides that \u201cIf the statement as to securities in Glass \u2018D\u2019 shall disclose that any of such securities shall have been * * * issued for * * * intangible assets,\u201d such securities shall be placed in escrow as therein provided. Section 36 provides that \u201cIt shall be unlawful for any officer, director, solicitor, broker or agent, to sell or offer for sale any securities in Glass \u2018I),\u2019 in any other manner or form than specifically set forth in * * * section 9 of this Act.\u201d\nAs all these sections refer expressly and only to Class D securities, it is apparent that the legal conclusions alleged in the bill, as above stated, are correct only upon the theory or assumption that the transaction sought to be annulled was a sale of Class D securities, and this is the theory advanced by complainants\u2019 counsel. If the transaction was one included in the statutory definition of securities in Class B, then the provisions of the statute relating only to sales of Class D securities have no application.\nSection 5 of the Securities Act, Cahill\u2019s St. ch. 32, \u00b6258, begins as follows: \u201cSecurities in Class \u2018B\u2019, being exempted sales, shall include: (1) An isolated sale of any security by a bona fide owner thereof, or his representative, for the owner\u2019s account, such sale not being made in the course of repeated and successive transactions of a like character, and such owner not being a broker or dealer in securities or an underwriter of such securities; * * *.\n\u201cSecurities when disposed of by the persons and in the manner provided by this section, shall not be subject to the provisions of this Act in such transactions.\u201d\nWe think it affirmatively apear s' from the allegations of the bill above recited that the transaction in question was an isolated sale of securities made by bona fide owners, for their own account. There is no allegation that such owners were brokers or dealers in securities, or underwriters of such securities. There is an averment that they made \u201crepeated sales\u201d of their interest in the stock placed by them in escrow, but no facts are given supporting that statement. The facts which are given show a single transaction only\u2014 a sale made at one time (March 1,1924) of their whole interest in the escrowed stock to complainants for \u201cthe sum of $13000.\u201d If the facts thus properly alleged are true, the sale was certainly not a sale \u201cmade in the course of repeated and successive transactions of a like character,\u201d for, on the facts stated, there could be only one such sale, and the demurrer admits only such facts as are well pleaded. It follows, we think, that the transaction which the bill seeks to annul is by the terms of section 5 of the Securities Act expressly exempted from the provisions and penalties of that act.\nWhile, by the terms of the escrow agreement, the owners of the stock in question agreed that it should not be sold or transferred directly or indirectly while it remained in escrow, the statute does not require such an agreement to be made. Only one of the complainants was a party to that agreement. His remedy, if any, is not in this proceeding. The bill is not drawn on that theory and states no ground for equitable relief on that score.\nFor the reasons stated, the decree is affirmed.\nAffirmed.\nGridley, P. J., and Barnes, J., concur.",
        "type": "majority",
        "author": "Mr. Justice Pitch"
      }
    ],
    "attorneys": [
      "Harry A. Biossat, for plaintiffs in error.",
      "D \u2019Ancona & Pelaum, for David H. Daskal, George H. Daskal and David Davis, defendants in error."
    ],
    "corrections": "",
    "head_matter": "Henry W. Fuchs et al., Plaintiffs in Error, v. David H. Daskal et al., Defendants in Error.\nGen. No. 31,189.\nHeard in the second division of this court for the first district at the October term, 1926.\nOpinion filed March 29, 1927.\nHarry A. Biossat, for plaintiffs in error.\nD \u2019Ancona & Pelaum, for David H. Daskal, George H. Daskal and David Davis, defendants in error."
  },
  "file_name": "0107-01",
  "first_page_order": 141,
  "last_page_order": 146
}
