*1 respondent. finding That issue and questioned was not average wage necessarily weekly referable are issue fixing compensation rate. evidence each other wage undisputed petitioner’s truck driver rate as a hour, hour worked over per time half each and a $1.02 eight week, forty per a minimum of and that he worked hours employee per day. other and one testified hours Petitioner appears days per there week. It thus truck drivers worked six finding by court support implied the trial evidence wage average weekly petitioner’s Under $51.00. 279, Procedure, are provisions we Rules of Rule Texas Civil finding support judgment. required imply Ass’n., App., Emp. 36 S.W. Ins. Tex. Com. v. Texas Barron 2d App., Wimberly, Tex. Civ. 464,468; Ins. Co. v. Traders & General 345, 343, 2d writ dismissed. 85 S.W. Appeals judgment the Court of Civil is reversed judgment is affirmed. The will of the trial court days in which to file motions date
have fifteen rehearing. delivered, Opinion June 1956. G. Harold Et
Edmond L. Cole Al A-5244. March 1956. No. Decided Rehearing June 1956. overruled (291 704) S.W. 2d Series *2 Golden, Croley, Howell, Mizell, Ralph Howell, Johnson & J. Roach, Dallas, Jr. L. petitioner. John Appeals holding Court of Civil erred in there was sale, act, or contract sale within the terms of the securities respondent since anything evidence that the purchase showed did not petitioners, merely copurchasers but were with having petitioner, purchase all made party from a third having party loan all made a to a third and the securities act regulate apply nor does not undertake does it to transactions copurchasers Hults, between venturers. Fowler v. 138 636, 478; Davis, 2d 161 Lewis v. Texas S.W. 145 Texas Fishback, 146; v. 2d S. W. 2d Smith S.W. 771 error refused. Bergman, Douglas E. Davidson Silverberg, & Philip Dallas, respondent. Silverberg, all of points petitioners cited response to Herren Hollings- v. In Luling 735; Co. Oil & Gas 2d worth, 140 Texas S.W. 716; Co., Holcombe Refining 2d 191 S.W. Humble Oil & v. Lorino, 2d 307. 79 S.W. 124 Texas opinion of the Court. delivered the Mr. Justice Culver from Brown Respondents to recover Cole and Gould sued alleged expended purchase of securities $10,000.00 in an sum of 600a, Article Brown, by petitioner, in violation of to them sold Texas commonly Statutes, known as Vernon’s Civil Judgment has been Act. favor 369. Appeals. 276 2d We by the Court of Civil S.W. affirmed agree that result. great opinion in that detail The facts are set forth *3 briefly possible. as only shall summarize them we mining Mexico, Fields, required funds operator A Howard rep- development properties. for further resentative, Kane, His authorized of his $30,- proposed lend that Brown and others paid with- purpose. 000.00 to Fields for that The loan would be further per a It with at five cent. was reasonable time interest mining convey properties proposed to a that Fields would his capital S.A., corporation, Minera and one-fourth of the Garbo corpora- another of Minera would transferred to stock Garbo tion, cor- Industrial Mexico. stock in the latter Ores de $30,000.00 poration then lenders of the would be issued to the proportionately Brown was at the as a further consideration. Company, securities, a for Beer a dealer in time salesman & Ivey partner Ivey. a in the firm Brown Brown and and & $5,000.00, participated in in the amount of and the loan Gould litigation, $5,000.00 others, and Cole for each to this varying in for amounts. came Gould, presented
Brown venture and furnished him copy prospectus of a memorandum and a included properties by Fields, description owned financial state- and other information.1 in turn ment Gould then made known proposal The matter to Cole. was discussed between Gould occasions, upon request Brown on several and and Gould mailed copy prospectus. the memorandum and to Cole and Gould being entirely venture, satisfied as to the merits Cole not auditor, proposed Bloch, go that he and Brown Cole’s would Appeals is shown in full as a 1 This memorandum Note to the Court of Civil opinion, 2d 371. 276 S.W. defrayed investigation. Brown and make a first-hand to Mexico Bloch, without trip expenses both himself this for any- understanding respondents, agreement expense. any part else, him for of this one would reimburse return, satisfactory, being Upon report both their Bloch’s $5,000.00 participate to the extent Cole decided to Gould each, and Bloch himself invested $1250.00. Brown,
In accordance Gould with instructions Agent. Brown, payable L. Cole made their checks to E. acknowledged checks, writing respondent receipt each follows: acknowledge your receipt
“This letter for will check $5,000.00 agent deposited Brown, which will be ac- the E. L. Republic Bank, at Dallas, count National transmittal for to William Kane and G. will turn be transmitted to Howard H. Fields. is repaid by It understood that the loan will be Fields through promptly Kane as as is advisable. will make This also your subscription of record with Mr. Kane that is received Mexico, of all authorized stock Industrial de Ores l/8th C.V., S.A. De company and that the total stock of con- now 27,000 preferred 30,000 sists shares one common—all peso par. subscription you total cost to will be $500.00 payable July on or before mutually 1953. It understood private purposes investment act- am *4 ing agent group.” as for the promptly Brown Kane, transferred these funds to in Mexico. parties months Some later the hereto ascertained that corporations affairs of misrepre- these two Mexico had been Kane, sented to them apparent Fields and and it less became more or the investment Later, would be a total loss. certificates of stock in Industrial Ores de Mexico were tendered respondents, rejected. to respondents and them Thereafter assigned right, and delivered to Brown all of their and title property, rights interest “in and all of property in- and (letters crement described in the attached instrument re- Brown, ceipt from otherwise described as in- 6) Exhibits and tending by general description this my include right, all of $5,000.00 title and interest in and to loan and the stock sub- rights scription A,” seeking described in comply Exhibit thus 600a, with Section 33a of Article Vernon’s Texas Civil Statutes. registered dealer It admitted a is that Brown was not Secretary Act, under of State the Texas Securities and that issuanqe authorizing disposal permit had the and issued no alleged question presented for here securities. Therefore the petitioner a sale Brown or not made determination whether respondents. of “securities” to the invoking aware, So far as we are time a case this the first penalties appellate courts, the though of Section 33a has reached the al., writ et 2d Smith al v. Fishback et S.W. adoption prior 33a, an ex- refused, decided to the Section royalties change corporation held of stock a for oil purview of the Se- within the constitute curities Act sale securities permit Secretary requiring State, from the plaintiffs and their con- and rescind were allowed cancel tract. apply to Petitioner asserts that the Act Securities does following (1) transaction, for made reasons: That he this any respondents, merely co- no sale securities to but was
purchaser (2) them; he was an adventurer with transmitting agent only of and investors in other money delivery (3) Fields; their to Kane for dealing terms under within the transaction he was with securities (4) exempt Act; of the Section that the transaction 3(k) Act. argues point, petitioner As first to the that Kane was the merely joined seller, with Gould Cole making the ac- others the loan to Garbo Minera or Fields and quisition Mexico. facts do stock Industrial de Ores along respondents’, that Brown his show invested funds profit and, loss; them, a total that he received no like sustained knowingly transaction; on that he did not commission representations any fact; make false rely by petitioner, them did not on made to statements through contrary, investigation, but, on conducted their own report. solely auditor, their and relied on the auditor’s own subscribing that all loan Petitioner maintains together co-purchasers; acting merely *5 agent transmitting respondents money their of served as the petitioner respondents acquired equal Kane, and and that to rights person and the same same made investment from the manner. the same regulate
Admittedly, pur- the Act does undertake to against purchasers. Only protect sellers to or sellers chasers regulated. Hults, Texas are Fowler v. sales and 146. Davis, 468, 199 2d 478; 145 Texas 2d Lewis v. S.W. S.W. purchaser partici The fact also and a that Brown became a ipso being Obviously pant prevent does a facto his a seller. purchase part dealer could of offered for sale a the securities he part provisions and a Act sell to others. The comprehensive. 2(e) are and broad Section defines term “sale,” including disposi “every or “offer or “sell” for sale” tion, attempt dispose security value,” pro or to of a for given “any security vides or or as a bonus delivered with of, any purchase thing on account other or securities value, conclusively presumed part shall be a constitute subject purchase for to have sold value.” been meaning “any The Act further the term “sell” act defines by made, which a sale the term ‘sale’ or ‘offer for sale’ sale, subscription, option shall include a an a solicitation sale, sell, attempt sell, directly an by or an offer agent or salesman.” seller, Under terms of the Act it is true that Kane awas petitioner but if that fact alone responsibi- would relieve of his lity then acting Kane capacity could have denied of a by showing Clearly may seller that Fields was the seller. there interpret more than may one. weAs the Act the seller selling process link in chain inor the words of performs by “any the Act he is one who act which sale is agreed Suppose that Kane had pay made.” com- securing participation on respondents mission and others venture, hardly in this then it could be denied that under the here would facts shown Brown have earned commission participation respondents. his resulted because efforts acting agent he only Petitioner claims that as the intermediary accepting the funds and for- warding seller, solely them to the orderly convenience and handling. says completely He shown all the facts and circumstances, particularly by acknowledg- the letters of (Exhibits 6) written 3 and ment with the nota- acting group. support for the posi- that he was In tion his Hollingsworth, Herren v. cites tion Texas apply. 2d the Securities Act held where not to 167 S.W. case, however, Herren was neither to sell buy. nor In that explore Hollings- find driller who would authorized to He was gas, contract, agreeable and a if ranch for oil worth’s *6 negotiated Hollingsworth, then be between would the driller Hults, supra, action, in Fowler v. like that them. This cause Granting Brown Act. not condemned the Securities trans- agent in the respondents, must been as he have was the resulted- Kane, only part of and mittal of the funds to that was respond- dealings respondents. had theretofore with agreed prior participate to the time ents in the deal had not, acknowledgment could Petitioner letters of were written. responsibility for by designating agent, escape his himself pur- leading negotiations up their and Cole with Gould originally the matter chase. Brown himself admitted that presentation by Kane, that it was from his to him submitted He interested. proposal became referring testified, Cole: Gould “Q. reference to And the entire conversations with exception of you, they not, matter with one were with you; trip is Mr. Bloch made with to Mexico which correct? Yes, say
“A. I should so.” Michigan pur- In to the sufficient hold one liable stock, actively if he chaser assists in the unlawful sale by way introducing recommending the securi- salesmen and ties, notwithstanding representations the fact that he made no procuring And is also and was not the cause of the sale. believing though money, he would true had invested his own he profit, commission on the make a and had received no sale. 832; Bicker, v. Lewis v. Beckwith, 235 Mich. 209 N.W. Chambers 605; Thompson Cain, 226 247 Mich. 225 N.W. Mich. 249. 198 N.W. displayed considerably salesmanship
But Brown ac more initially tivity Michigan than was cases. After he shown proposal held discussed the w'th Gould a conference was Cole, present Brown Brown’s office Gould Bloch days A few later Brown called wrote for further information. response and showed etters received Bloch inquiry. him (cid:127)> again then for further talked Brown wr-. details and showing information him F ..dditional received. The to Bloch suggestion trip then '"ieat Brown’s and at his to Mexico was n agreed resp : to make the expense. nts investment When (cid:127) gave to how the checks were to made instructions n ; money clear but Brown’s activi- remitted. and the parti- have repeated would not ties and efforts cipated transaction. *7 joint apply ad to a settled that Act does
It is well not joint adventurers. Joint and to between venturer transactions right partners re denied adventurers are not to be merely comply with cover their a failure to interest because equally that a Act and we think it true dissatis joint joint may adven fied from other adventurer recover merely comply latter turers because the failure 527, Chandler, 732. the Act. Polk v. 276 Mich. 268 N.W. community joint
To constitute a a adventure there must be participation profits. of interest and It in the nature engaged partnership joint prosecution particu- a in the of a Lorino, lar profit. transaction for mutual Holcombe v. 124 Texas 446, 79 2d 307. S.W. joint
For a community adventure to exist there must be a profits any. interest as losses, both if It is said in Luling Co., Oil Refining & Gas v.Co. Humble Oil 144 Texas 475, 716, 191 2d relationship S.W. that whether or not such generally depends upon parties. exists the intention of the In relationship case the joint was held not a to be adventure partnership. or party The contract did not authorize either any liability create binding to third which would have been being relationship
on the other.. The nature partnership, profits. losses must be shared as well as case, In our community if there awas it could interest only petitioner said to exist in that respond- well as the ents alike invested repaid their funds. Each But, thereto, amount of his loan. in addition a considera- making loan, tion for each pro was to his receive rata amount of the stock in Industrial Ores de Mexico. Each was sell, liberty of, dispose stock, at hold that as he saw fit. joint given An illustration aof adventure is in Worth Fi- Co., App.
nance Motor 1939, Co. v. Hillard Tex. Civ. 131 S.W. purchased 2d 416. two defendants an automobile for the selling purpose joint profit it for a to both of They them. expressly title, warranted profits. both and divided the possible, through In our case would have been the sale Mexico, stock Industrial Ores de for the several in- varying profit amounts, realize a depending vestors to upon 632 joint control of the stock.
the time of sale of the enterprise. There was no petitioner officers or nor Neither any authori- directors of Industrial Ores de Mexico or exercised management ty operations. entirely under the over its It was conclude, therefore, elements of Fields and Kane. We present joint adventure are this case. support In constituted his contention that the transaction Supreme adventure cites two cases from the Michigan, Co., Hathaway Royalty Court of 90, v. Porter 296 Mich. Chandler, 138 A.L.R. and Polk N.W. Mich. 732. In latter fourteen men de- N.W. case actually purchase presumably sired to and did land acres of only develop profit. to hold at Because the owner would sell financially responsible, name those the land was taken *8 parties participation of two of the and certificates of issued to describing by all court the interest owned each. The held this Sky joint provisions Law to be a adventure and the of the Blue applicable. joint is In adventure were the former case a single enterprise jointly carry defined as an undertaken out a to project profit profits In for losses. shared as well as the community there must be a interest addition it said subject property over the matter or as well as some control rights peti- cases aid of the contract. We think neither of these tioner in his claim adventure. Appeals
Petitioner maintains the Court Civil erred holding in 3 and 6 must denominated that Exhibits be securi- the of the Act. 1 memorandum ties within terms Exhibit is the respondents, by petitioner quoted a furnished to the and as Appeals opinion. and footnote the Court Civil Exhibits by petitioner respondents are the letters written acknowl- edging receipt money for transmittal to Kane. These of the respondents they papers demanded returned when Brown. The insists that under from reimbursement securities, theory these documents be termed for could no simply prospectus a or a statement that one was reason merely receipts, upon which no suit plan, others were and the binding one; brought on no that Brown could and were could be respondents prospectus to the or the did not sell and position untenable. receipts. think that We only respondents instruments issued to the were the These They nature of the tranaction. clearly must recited be and “security” term of indebtedness.” as “evidence The construed Act, any part, preorganization broadly defined of indebtedness. receipt certificate or note or other evidence in- 600a, sufficiently 2(a). covers Art. Sec. The definition given. receipts the Federal Under cludes the character here note or giving promissory a Securities Act of 1933 the exchange personal loan of an for evidence indebtedness Act. Llanos purview a is held be sale of securities In- States, stock in F. 2d At United 852.2 rate part respondents dustrial Ores Mexico to be issued to de “security.” That stock for the consideration loan was gave respondents at time was not delivered to the by the checks to it had not been issued their corporation. Brown because tendered stock were Later the certificates of for rejected. actual consideration promise repay money paid by was the assign one-eighth capital Indus- stock of the total each de Mexico. trial Ores argues, however,
Petitioner the recited consideration payment stock was an additional of $500.00 suggested, paid. was never The facts are that $500.00 arbitrary figure agreed upon sum as an $500.00 paid by only. purposes tax set for was not The $500.00 retained the Industrial the stock but was to be Ores de Mexico out of funds received from Minera. Garbo only part Cole was total consideration on the & Gould each remitted to Brown. $5000.00
We conclude that the transaction did constitute sale *9 respondents respondents sufficiently com- Brown to and that plied reconveying provisions by with the 33a Act Sec. by all purchased Brown all interest and evidence them of indebtedness. argues stamped as
Petitioner that if to be a seller he is made then likewise Cole and turn Gould made sale to Cole complete “a a sale to Bloch that all this would lead to and litigation” the re standoff interminable and inconclusive time, being they at the sellers as sult that were all one same purchasers. argument Well as This first because is unsound person would not excuse violation the law one another’s If Brown violation. Gould had sold it would not relieve to Cole think, place on his In the second so far as sale we Gould. concerned, Brown was the made to and Cole were sales Gould Act, 77b, 2 Compare U.S.C.A., (3) (1) with Federal Securities 2, (a) Act, 600a, Stats., (e). Ann. Civ. Sec. Art. Vernon’s little, principal with he actor. While he had conversation Cole directly Bloch, agent. did deal with who was Cole’s auditor apply The last Point the trans- the Act did not exemption action described because under an it came Sub- (k), reading: division any partnership, pool,
“The sale of an interest or other company, corporation, membership not a which does total (10) and will not after such sale ten or- exceed ganization expenses of which two do not or will not exceed per (2%) capital company.” cent of the total invested of such dispute There seems to be some as to whether or not membership ten, total exceeded the number of and we stated any testimony organization do not find expenses to whether or not the per capital exceed two cent of the total invested company. upon It resting would peti- seem to be the burden prove tioner to facts which exclude would him from operation But, rate, appears at Act. it in- terest corporation, namely, sold in this case Indus- — Mexico, ap- trial exemption Ores de and therefore the does not ply. enough True to hold Brown is a liable to harsh
penalty and a inequitable rather result. The not misled profit no who made or commission respond likewise sustained a total loss of his investment. The speculation ents knew presumably that was a at time they considered Naturally stood lose. if the venture had turned gladly out their favor no doubt would have profit. accepted hand, On the other deal case not one ing wles, equitable pi application but with the wasp-:-' prevent thing very Securities Act ¿s^ed '1 (cid:127) here, happened namely, Despite lie our of worthless stock. sympathy natural for tl "itioner under these circumstances ' n may respond; we must sustain which sum cause action marized as follows:
1. Petitioner icensed “dealer” in securities. *10 2. security respondents. made de” Petitioner of a permit 3. Petitioner failed to secure for the sale of the security. purchase the full respondents
4. Petitioner is liable security, plus interest. price Appeals affirmed. Civil judgment of the Court of
The 28, 1956. Opinion March delivered dissenting.
Mr. Justice Smith petitioner, respectfully my opinion that if the It is dissent. Brown, here to the Securi- presented had matters involved deter- Secretary for a of State ties Division of the office of the mination, the transaction been advised that he would have 600a, Statutes. exempt Annotated Civil under Vernon’s Article inescapable in view It seems me that conclusion is this Cole, placed reli- respondents, no that the evidence Gould Brown, con- any representation of to the on but ance whatever independent in- agreed trary careful to make the loan after a perpetrated vestigation. Brown that concede The any in strength manner. The no fraud or acted in parted faith bad representa- money Brown’s with no on the tion, judgment. trans- solely relied on their own but involved, though 3 and held that Exhibits action even it is exempt meaning Act, under are are securities within the under liable cannot be held Section 3 the Act and here does 33a The transaction involved Section thereof. against Secretary proceed Brown authorize the of State to provides that “When- under Act. Section 33 of the This section upon Secretary com- appear either it shall of State ever nego- issuance, sale, promotion, .plaint otherwise, or any tiation, within securities advertisement or distribution including security State, any in the subsections embraced exempted including under any transaction Section company 3, any shall have person or provisions of Section device, employ scheme employs, employed about or is * * why defraud, action reason etc. artifice to per- fact it is conceded is the cannot be taken loan. here Just act in connection with fraudulent formed no lending money was the say here that the transaction I wish or whether stock at interest it was' loaned whether 6% n greater contention, my in return. It is received value was to be argument are Exhibits 3 and 6 granting the sake of contemplated security under Section securities, it is a security under exempt rather than a Section transaction under the fact that Section reason comes Act. One joint venture. shows a evidence all the *11 majority concedes that Act does Texas Securities apply joint
not to a joint and adventure to transactions between adventurers, may joint that a adventurer not dissatisfied joint recover from merely other of failure adventurers because comply agree the latter to with the Act. I cannot with the majority conclusion of the record in that this case does support petitioner’s contention that he and were co-purchasers or joint co-investors or adven- co-adventurers enterprise, turers the same petitioner all the acts of especially writing designated more letters, of the in the record performed by as Exhibits 3 and petitioners capacity agent participants for the mutual benefit of the joint enterprise. purpose For the of the discussion of point I shall assume Exhibits and 6 are securities meaning within the opinion of the Act. Later in this it shall be my purpose petitioner not, to show that did a dealer other- wise, offer security. for sale or sell a my opinion
It is Act, 600a, the Securities Article Ver- non’s Statutes, Annotated Civil now Article An- Vernon’s Statutes, being notated construed, penal nature, strictly Civil should be petitioner competent unless by has been shown probative evidence of force provisions to have violated some (the Article 600a law in effect at all herein) times he involved compelled should respond damages not be it should held this Court that position were not in a maintain provided the cause of action for in Section 33a of Act. That part: section reads in “Every sale or any security contract of sale of made in vio- any provision
lation of Chapter of this shall be voidable at the election purchaser, of the who shall be entitled to recover from law, the seller in an action upon at tender to the seller of security sold, proper transfer, together form for with the dividends, amount all interest, and other income and distribu- tions purchaser received upon security, from or such paid by full purchaser amount security, for such * * interest purchase; from the date of Let us assume Exhibits 3 and 6 are securities within meaning Act, of the question then arises: Did any provision violate give Article 600a which would rise to alleged the cause by respondents of action under Section 33a Act, of the or was joint the entire transaction a ad- business If venture. the latter is the relationship true status of the be- parties, then, granting tween that Exhibits 3 and 6 are respondents should meaning Act, the within the securities joint AAct. 33a under Section to recover allowed the sta- resort cannot under such circumstances adventure adventurer not mean tutory remedy, does but this *12 legal of his the violation remedy of in the event without a group. of rights by the or more members one 540, Pa. Clemson, 103 156 Atl. v. In the case of Jackson contract were parties the super. 39, the to held the Court following the of co-adventurers, case quoted and then the Kinney, 130, 339: Jones v. 146 Wis. N.W. buy- agreement, join by persons, common
“Where several fractional, undivided interest property, acquire a ers of each by him, they paid owe therein, proportionate in the amount good, enterprise duty faith in to one another can, disclosure, by com- secret fair and neither one full and advantage co-adventurers. rebate, over his mission or obtain money given, each usually and the each is contest of funds, in- obtained, understanding upon and belief given enterprise, terest, and will to the and aid of each is agreed one, by treaty upon. For secret within the bounds upon seller, a fraud his or rebate is to obtain a commission buyers.” fellow support my particularly contention cite these two cases joint in the
that present adventurers case, supra, justi- Kinney
case. In the facts the Jones v. classifying fied the in co-adventurers court enterprise. were: “It joint purchasers, in a common The facts plaintiff, defendants others was understood between the together going purchase certain leasehold were all in property is, basis; in the on a each would receive ratable stock, corporate by purchased, represented later shares contribu- proportion the amount of his a fractional interest money.” purchase tions to the stating general quoted after rule first above
The court said: ruling support court below find no in law for
“We joint purchasers may securely withhold his that one of several purchased payment, yet acquire an interest share * * added). (Emphasis property fraud, *.” and commit no Co., 262 Mich. Trust In the case of v. Guardian Wardowski 422, 908, said: the Court N.W. Sky
“It violation ‘Blue Law’ several persons join furnish, proportionately, pur- parts price property chase of real for their to be held benefit organization, trustee. Sales syndicate, units such a after cannot compliance be made Sky without with the ‘Blue Law.’ * * *” (Emphasis added). In Hathaway Pool, Royalty case of 296 Mich. Porter plaintiff 295 N.W. Fish cited the case of Smith v. back, support App., refused, Tex. Civ. 2d writ S.W. agreement of their contention that Hatha involved way case was in violation Act. The Court declining Fishback, supra, pointed to follow the case Smith v. joint why out upon adventure was not relied as a reason apply. “However, Securities Act should not said: Court appear does not that a the cited case adventure ground upon relationship relied distinguishing as the *13 of from a question sale of securities. That submitted has been argued in all of the in that a cases which this Court has held joint Law, Sky adventure does within the Blue come it seeking part has been insisted in those these controversies of on agreements,
to cancel make such that our statute did not exception relationship, provisions in such however, applicable Court, of Act has thereto. This clearly joint statute, held that a as adventure is not within the agreement it question existed time at the in was entered into. Whether the Texas courts would so hold we know. do not In question the cited case the In instant was not determined. joint case practically adventure contention constitutes the entire of defendants.” Michigan Hathaway
The statute under consideration in the case, supra, very 600a, similar in terms to our Article Act, Texas Securities which was in at all involved effect times controversy. example, Michigan in this For statute defined “seller,” “securities,” “salesman,” “dealers,” very much language here, yet every the same the Court held case distinguish joint upon where adventure was relied rela- thought tionship gan securities, from a Michi- sale of even (just exception statute did not make an as our Texas Securi- relationship, Act) ties an examination of the authorities jurisdictions Courts have determined other revealed upon particu- question joint adventure facts each lar case. Hathaway opinion written in
The and at legal concept joint adventure time the court considered the origin. quotation from 30 opinion contains a modern Am. as follows: Jur. legal recognized concept joint widely adventure
“The now origin. purely It the creature is modern has been said to be recog- early of the American common law did not courts. relationship unless nize the the elements co-adventurers generally proved, partnership it is now were disclosed and but combining may, by persons two or more their understood which, property venture, while joint create a status or labor in a having many partnership, of a some or of the characteristics not identical therewith.”
The court continued:
“Syndicates,
comparatively
joint adventurers,
only
like
have
recently
brought
legal
subjects
been
into
considera-
notice as
regarded
They
generally
subject
tion.
have
ex-
been
to some
ceptions,
falling
partnership.
applicable
within the rules
aspects, they
In
joint
closely
some
seem to
related to
be even more
* *
*.”
adventures
whole, however,
“On the
must be said that Courts have
any very certain,
laid down
satisfactory or all
defini-
inclusive
joint adventure,
tion
aof
nor have
established
fixed
thereof,
or certain
cases, they
boundaries
but in most
have been
merely
given
content to determine
whether the
or conceded facts
particular
relationship
case
constituted the
ad-
ventures. 30 Am.
Superior
Jur. 678. See State Ex rel. Ratcliffe v.
*14
County,
al.,
443,
Court for Whitman
et
108
184 P.
Wash.
348.
* * *
‘Joint Adventure’ has been defined
as an
of
association
persons
single
carry
two or more
profit,
enterprise
aout
business
for
Fletcher,
153,
Fletcher v.
206 Mich.
172
436. It is
N.W.
said,
instance,
enterprise
part-
an
that such
differs from a
* *
nership
only
single
*;
because it relates
to a
transaction
joint
distinguishable
and that a
joint
adventure is
owner-
ship
tenancy
in common because the latter lacks the feature
adventure,
O’Donnell,
al.,
902,
Bond
al
et
v.
et
205 Iowa
218
898,
v [*] [*] joint contemplates
“It can be said that a an en- adventure terprise undertaken; jointly such it is association of joint carry single project profit; undertakers out a losses, though profits shared, are to well as be as
640 liability joint proportionate part of a of the adventure for a expenditures enterprise may joint losses or affected * * contract, the terms a contribu- *. There must be parties undertaking tion joint to constitute to a common *; * * community as adventure interest as well right subject con- property some control over the matter or tract, 587; 235, Herberg, al., v. P. Griffiths Van et 99 169 Wash. Darling 163, Buddy 784, al., et al 2d 58 v. et 318 Mo. 1 S.W. A.L.R. 493. thereby parties particular
“Whether the to a contract have created, themselves, joint as between the relation of adventurers relation, intention, or depends upon some other Reid thir actual Shaffer, 553, only relationship v. F. arises Cir. 249 and such Berkey such, when intend to themselves associate Ry. Co., Third A.L.R. 599. Avenue 244 N.Y. N.E. This intention is with the or- to be determined in accordance dinary governing interpretation rules and construction Corp. (1928) Players Laskey contracts. Gleichman v. Famous — 241 Mich. 43.” N.W. It joint has been held adventure constitute parties efforts, property, money, skill or must combine their knowledge undertaking in some common contributions respective equal char- need not or of the same something promo- acter but there must be some contribution enterprise. tive of the generally joint may
It held that be en- one adventurer enterprise trusted with the actual without control changing joint its status as a In such a situation adventure. right seems to me that mean that each to control does not party right has will one to whom interfere at group capa- duty performing has entrusted acts agent city long group performs acts for the so he agreement understanding in accordance with the between parties. majority seems hold that the element of undertaking equal joint in this control must exist before the adventure, joint case can order for be classed as a present proof the element of there must be adventure to be petitioners group or others of the exercised officers directors of Industrial Ores de Mexico or *15 opinion, authority my operations. its In the element some over nothing determining of with whether or not control has to do petitioner the facts in this case show that together the agreement an to first entered into advance others
641 Mexico, later group a loan to Howard and the Fields in to.be corporation to repaid money form of stock in the organized is It de Mexico. be and known Industrial Ores bearing equally no true that the of control can have element questions on the and that or shall later whether discuss as defined in sold offered for “securities” sale the Securities Act. majority, me, its conclusion it seems to has reached joint joint control must shown can be a before there recognized by principle
adventure applying in this case the well brought personal of pant injury law announced occu- in an suits against car, of a car action a and the cause of owner of being alleged negligence based on of of the driver of acts question usually car. The in such Does evidence cases is: finding adventure, warrant a joint that the relation was that or does the evidence as a matter rela- establish of law guest. tion was one host and in In such cases order estab- joint lish relation of must show as adventure evidence Peterson, 347, 1043, said Carboneau v. P. 2nd Wash. 2d equal relationship possess that “The must the element of right a performance voice the manner of of the enter- prise. By equal this is meant that each has right management undertaking, and conduct of may govern equally upon subject how, that each when agreement and pleasure performed. where the shall If the will party respects, of one is to control the others in these joint there is corollary preceding no adventure. As a to the re- quirement, right party equal that each follows must have an agencies This, course, of control over used. does not mean right that each has the to interfere at will with the driver duty operating previously whom the an automobile has been mean, however, right intrusted. equal It does that each has an general supervision instrumentality, authority equal over the directing instrumentality per- how the be used in and, enterprise, likewise, equal responsibility formance of the performance.” the manner of such I think the case Luling Co., Refining Oil & Gas Co. Humble & Oil Texas majority, point. 2d S.W. cited is not in primarily question case That involved of limitation. The court simply held, first, Refining Company that the Humble Oil & Luling corporations, Company Oil & Gas were each permitted partnership. under their form charters were making general relationship After statement that “The partners, mining partners being adventure or contractual nature, relationship generally whether exists de- its *16 controversy parties.
pends upon the intention of the Where the corporations, a court parties are parties is between the and the partnership that inten- a existed unless would not declare that though the purposes for which clearly appeared, tion the even fully purposes for which the contract made within was chartered,” con- that the corporations court held the the are part- create a negatived intention to an tract the existence of added). Ruling (Emphasis nership Humble and relation between not in case should am result reached that that convinced the determining given controlling the intention of in effect be parties present in the case. involved community majority in that element of
The holds effect lacking relation for reason the be- of interest and that that again, Here joint a tween is not that of adventure. I realize question must look to the record. to determine this we proof objective purpose proof a alone is that of common or Community per- community in a of interest of of interest. usually purpose is connected with of a common formance purpose accomplished a distinct is nevertheless be but Peterson, supra, of v. As said in the case Carbonean factor. purpose, parties may objective and still “The a common or have lacking. instance, par- community may a For two of interest be object, engaged may performance purpose ties in the of a be advantage one, may which the sole interest be whatever, or the no benefit which the other is derive may from that of interest of the one distinct different a ad- the other. In either such cases there would ‘community applied venture. term interest’ as The joint adventure, common both relation means an interest is, parties, identity a interest venture mixture or reciprocally and from which which each all are concerned a mutual each all derive a material benefit and sustain responsibility.” respondents rely very strongly The on cse Chambers Beckwith, majority 247 Mich. and the N.W. holding support
cites the was en- case its gaged and, therefore, enterprise, unlawful had violated application no Securities Act. That case has our case. engaged Court held in a case that the defendants were unlawful, enterprise common common which was and that enterprise unapproved stock. of the defenses sale of One signed plaintiff subscription was that had the stock organization. prior company plaintiff denied. The its Michigan taking of held that under the statute the sub- Court offense, scriptions purchase unapproved was an stock participated transaction actively if defendant signed subscription for plaintiff the fact the stock organization corporation before the would not excuse *17 defendant. proceeded question
The court then
to
main
a decision
the
refusing
to
case which was: Did
trial court err in
the
having
refused,
instruct a verdict
was
for the defendant and
so
charge,
jury,
it error to instruct
court did in its
the
as the trial
stock,
“If
participated
that
the
aided
defendant
the sale of
sale,
and
the
abetted in its
court held that
he was liable?” The
liable,
theory
group
defendant
on
of which
was
the
that the
this
member,
engaged
the
a
in an unlawful
defendant was
was
enterprise
actively
and
in the com-
that
the defendant
assisted
enterprise,
mon
which was
stock.
the sale
This leads
question
ato
discussion
not
of whether or
probative force
was introduced in our case
evidence.of
support
finding
express
a
implied
petitioner
either
that
was
securities,
a dealer in
as the term
is defined in
“securities”
majority
the Act.
opinion
The
assumes that Brown was a deal-
registered
er because it was admitted
Brown
as
a
had
majority
dealer.
only “question
The
then assumes that
here
presented for
petitioner
determination is whether
Brown
a
made
sale
respondents.”
of 'securities’ to the
I contend that
there is
probative
no evidence of
force in
record that Brown
was a dealer. The fact that Brown was
a
not licensed as
dealer
not-proof
is
that he
in fact a
dealer. In order for the Act
violated,
necessary
have been
it would
have
been
plead
prove
that Brown was a dealer as that
2(c)
600(a),
term is defined in Section
of Article
Vernon’s
respondents plead
Annotated Civil Statutes.
The
securities,
my
awas
dealer in
is
contention that
establishment of the fact that Brown was a dealer was a con-
precedent
recovery
pleadings
dition
under the
well
question
ques-
law. The
of whether Brown
a dealer
a
was
parte Price,
jury.
tion of fact to
determined
Ex
be
See
152;
Boyd,
384;
210
2d
S.W.
v.
Winslow
2d
Fowler
S.W.
Hults,
138 Texas
2d 478. The case was
S.W.
with-
jury
drawn from
decided
the Court. It could
ar-
gued
implied finding by
that we have an
the trial court that
a
However,
Brown was
dealer under the
Act.
I
Securities
do not
put
holding
majority
its
on
understand
that basis. If the
majority
impliedly
contend
trial court
should
found
Act, then,
say
Brown to
a dealer under the
there must be
finding.
implied
support
There
evidence in the record to
respond-
petitioner and
none. All
evidence
that the
is
shows
engaged
doctrine
joint'
a
ents were
venture.
statutory
exception.
implied
no
basis
There is
adventurer
is an
a
applicable to such
other
not meant
to be
than the Act was
you
applicable,
do
exception
then
implied
If
situation.
example,
if Brown
For
not even consider the
Act.
meet
no need to
there would be
was not a dealer in securities
Section, by
requirements
the Act since
of Section
dealer.
terms,
applicable only in
Brown was
its
My
the event
prove two es-
have failed
contention is
dealer,
(2) that
elements,
(1)
sential
that Brown was
prove either of these
he was a dealer
securities. Failure
against
precludes
recovery
Brown.
facts
later,
conclusively that
record which I
detail
shows
shall
together
respondents,
other members
*18
enterprise
group,
engaged
the
in a lawful
of
600a,
petitioner
guilty
of Art.
which
of no act in violation
was
remedy provided
would
invoke the
authorize
to
en
was not
under
gaged
33a
Act. Petitioner
of the Securities
Section
a member of the
sale
either alone
as
the
of stock
group.
soliciting subscriptions
purchase
for the
Neither was he
upon by respondents are those such
of stock.
relied
The cases
supra,
Beckwith,
was held that
the
as
wherein it
Chambers v.
unregistered
corporation
of a
was
or offer for
of
stock
sale
unlawful. That case
sale
Ioor,
cites
of Edward v.
205 Mich.
the case
617,
620,
analyze
I
Petitioner testified in respondents: “Q: Anybody together putting deal interested selling anybody organi-
or the of the stock or interested in the corporation zation of application ever made —was Secretary approval of State for of the sale of the stock Texas? “A: Not know of. * * *
“Q: then, Brown, you Now Mr. I will ask was the *19 stock of any Industrial Ores D’Mexico contained ever list Department from Secretary the Securities of the State Texas, being State to stock authorized be sold in Texas? my knowledge.” “A: toNot grant
I will group actually engaged if the soliciting subscriptions sale or was registered purchase for the un- corporation, D’Mexico, stock the Industrial Ores upon by controlling the respondents authorities relied would be any person acting as a vendor such stock would be sub- ject provisions to the strict 33a of Section the Securities However, Act. group the the event evidence shows that a agreement unregistered entered into an to sell stock each mem- group subject penal provisions ber of the would be to the statute, damages and could pro- be held liable in under the brought purchaser by any visions 33a in suit of Sec. pos- stock, engaged could not group but one so member of against of the sibly member a cause another have of action group 33a. under Sec. my assuming and 6 are
It is contention that Exhibits thereof, Act, especially within the Sec. 33a securities against reason respondents petitioner for still recover cannot respondents under the evidence most favorable forming group lend joined petitioner and others money profit, shown to and no sale or offer of sale has been group. dominant public The member of the outside of the public. purpose protection of the of the Act is for Securities regulate the object was chief law was enacted and its im- protect public fraud and sale of securities and selling position by engaged in worthless securities. those required Neither nor case were our register or sales- under as a dealer Act either Securities entering agreement lend the men after before or into the n aggregate group $30,000 could Mexico. The sum of to Fields of but, whetstones,- agreed accept chips repayment have repayment stock instead loan to be in the form of evi- D’Mexico. The certificates to be issued Industrial Ores corporation result dence is- conclusive that' this was born as group creative of which effort of participants was to and that motive of each active appreciated that a loss prolt. Obviously earn fact each the.' could be incurred. 3 and are
EXHIBITS shown, think, by arrangement, fully is Under the evidence, agreement, A, and memorandum of all the Exhibit there no this record Exhibits making and 6 consti- evidence in declaration, Act. In tute securities as defined “security” amI unmindful that the definition of of the fact Act, or “securities” as set in Sec. 2 of the contains out upon part phrase It “or other of indebtedness.” evidence respon- respondents pitch their of the definition that case. agreed plaintiff’s successfully far that Exhibits dents have thus letters, duplicate addressed 3 and which are exact one Nos. Cole, respondent, respondent, Gould, *20 the other to consti- Act, in the and there- tute as defined evidence indebtedness wholly is This deduction untenable fore are in law securities. by given majority letters and if construction these upheld any say must re- then I businessman financier or making slightest suggestion frain his friends that advantage ultimately it would be to his financial to advance a place, loan to a especially or or other citizen Texas Mexico dangerous group syndicate would it form a purpose, especially happens more so if he to be reputable designated licensed and has salesman been group agent, petitioner. to act as its as was the The letter which security by majority appears page has been held 2 on to be opinion. majority my plaintiff’s being It is contention No. Exhibit also respondents’ pleadings, Exhibit “A” attached to is not and advertisement, pamphlet prospectus, circular used by petitioner security, in connection with the sale of a but was only a prepared by petitioner request memorandum at the aof group, member of the and was not used in violation Section Act, charged by 23 of respondents. That this true is testimony shown Mr. follows: Questions by Respondents: Attorney for “Q: Now, Brown, you Mr. I you prepared believe said (Exhibit A). memorandum? 1 or Yes, sir, prepared “A: it. “Q: right, All prepared, the memorandum was to-
gether copies it, with numerous to distribute to various might who making be interested in an investment deal. Isn’t that correct? No,
“A: sir.
“Q: purpose preparing What was the it then ? my
“A: It was for own information. “Q: you Why prepare did copies? several * * people “A: These asked me to handle the details *. “Q: people you? What asked people
“A: who were interested in it. Mr. Samuel *21 648 pre- something; to prepare Wythe asked me me Mr.
asked to something Ivey.” pare and so did Mr. was group in the memorandum
These men were the before original copies prepared. Mr. prepared. An three were and in- copies purpose of prepared Brown denied that were prepared teresting invest, it anybody that was to but testified group Mr. Gould request of in at the those who before joined project and Mr. Cole venture. matter Mr. Brown admits that he told Mr. about Gould Gould, gave copy inci-
and him Mr. memorandum. looking opportunities to make dentally, constantly was Sanger, money. usually He a Mr. testified that he had lunch with suit, employee Co., in this of Beer & defendants one Sanger mar- playing and that the stock he traded with Mr. Sanger Brokerage ket; first, that was Com- Mr. with Southern pany city (Dallas) ; to Hutton & I followed him this and Company.” Company I to Beer and then followed him & suit, company party The latter was a defendant this but nothing judgment as it. entered that take was company complete because of failure connect the This of Mr. with the transaction. It was on the occasion one Sanger, friend, pre-luncheon that visits to Mr. Gould’s his lending $30,000 Mr. mentioned the matter to Gould of Fields, to Mr. it at the memorandum was and was time given but, conclude, to Mr. Mr. Brown Gould. knew Mr. Gould testimony Brown as from the he close Mr. was as Sanger. although Sanger fact, he was a was to Mr. In Mr. knowledge group, apparently of the had full member Brown, working in Mr. matter and was office with the same sitting Sanger’s and Mr. Gould at Mr. desk when loan $30,000 Gould, Mr. did was first mentioned to defendant, Sanger party choose to include Mr. but defendants, Company Mr. Brown selected Beer & perhaps to be theory on act of was the act of Company, Mr. Brown Beer & group and because was the first matter, and further would be to mention the able letters, plaintiff’s claim Exhibits introduce and, letters were evidence of indebtedness therefore testimony corroborates of Mr. securities. The memorandum prepared question why and when was Brown on the purpose group, important sole it shows more including Brown, money to lend and not sell Mr. stock. implement part: “In order to this reads The memorandum Gould, Cole, al) project (this group has the Dallas means et Kane has $30,000 loaned Mr. for 6 at Mr. Kane months 5%. with a corporation formed de Mexico called Industrial Ores common, 270,000 capital $30,000 shares, per preferred, peso corpora- peso variable; per capital of the stock 7/8th *22 put tion associa- will in for the the Dallas be escrow benefit go agreement tes and will to Mr. was our Kane which l/8th project. Mr. Kane him when we asked him to take over $30,000 corporation, will loan to Mr. Fields’ Garbo make the immediately convey Minera. Minera of its stock Garbo will 25% to common Industrial Ores de Mexico and the balance 75% $30,000 placed stock will in in to escrow a bank secure the per salary loan. Mr. month Fields will receive a of $500.00 paid corporation until the indebtedness and the will has been required keep $15,000 working capital a minimum of to on right hand. Mr. Kane has Minera take over Garbo monthly payments time the on this loan in default.” are paragraph convincingly Another memorandum which joint enterprise shows that this transaction was a and not the security following: sale of a in violation of Act is the Baker, Botts, “Fausto Priesto, Miranda Miranda & our attorneys, City called from Mexico 20 and June stated that he investigated through property had the Fields’ American Smelt- ing Refining corporation & and has worked out all on details corporations both project appeared and to him the to have sub- safety prospects.” stantial and excellent goes say: plan memorandum on to “We to send Mr. $35,000.
Kane a total This will $5,000 leave an excess of legal de Industrial Ores Mexico for expenses. and other This money is a loan and will come back to Dallas associates tax placed $1,000 free. We have Mr. Kane on per retainer of month all his services will be the benefit of Industrial Ores Mexico; go de syndicate will Industrial Ores to the Dallas 7/8ths $5,000. on the ratio of for each Mr. Kane will l/8th supervise operation, the Garbo collect bank each funds performed by month. All services Mr. fees Kane or interests properties by him for received services after the formation of will Industrial de be for Ores Mexico the benefit of Industrial $30,000 After Ores de Mexico. is returned and all indebted- paid, property pay approximately $4,000 should ness is $5,000 monthly interest.” to the l/4th Brown, Under all the facts circumstances Mr. writing 650 law, (plaintiff’s 6) was,
the letters acting matter Exhibits 3 and agent including respon- capacity group, for the Mexico, forwarding dents, accepting funds and them paragraph merely the un- reaffirms that refers to the stock derstanding repayment loan. The as to the manner refusing erred in trial court (cid:127)letters are not securities and the grant petitioner’s instructed motion for verdict. Cain, Thompson 226 Mich. I have examined such v. cases as ; supra) 609, (cited Beckwith, N.W. in Chambers Exchange Co., Howey 328 U.S. Commission v. W.J. 293; Gopher Sup. 1244; & 90 L. Ed. State v. Tire Ct. Co., are relied Rubber upon all of which Minn. 177 N.W. by respondents position. at- support I shall not their by respon- tempt analyze cases, these well cited as others Appeals majority. dents, as and the well as the Court of Civil applica- say my opinion they have no It is sufficient tion to the case at bar. *23 may any majority link in the holds "the seller selling process the words of he is or in the Act one
chain accept If performs a sale is made.” we act who which my stattment, is a seller as then it contention Gould against allowed recover as Brown and should not be well Brown, pros- Gould, not mailed or delivered the socalled Brown. Cole, It to me that as matter of pectus to etc. seems law we judgment far as at reverse render so Gould least should concerned. Ap- and the judgment of the trial court Court Civil judgment reversed and here rendered that peals should be respondents take nothing. 20, 1956.
Opinion June delivered Clarence W. Ferguson,* Al Et Louise Freeman Judge Et Al District July 11, A-5511. No. Decided 1956. (292 632) 2d Series S.W. page Freeman this 372. Cheswich v. volume
*See