70 A.2d 685 | Pa. Super. Ct. | 1949
Argued November 21, 1949.
These appeals are from an order quashing an indictment which charged the defendants, and Petroleum Drilling Corporation, with selling securities as dealers or salesmen without having registered with the Securities Commission of Pennsylvania in violation of the Act of June 24, 1939, P. L. 748, as reënacted and amended by the Act of July 10, 1941, P. L. 317,
The court quashed the indictment on the ground that the "working interest" in the proceeds of oil and gas alleged to have been sold in each instance was not a *277 "security" within the definition of The Pennsylvania Securities Act, supra, and therefore no offense in violation of it, was charged.
Section 3 of The Pennsylvania Securities Act, supra, 70 P. S. § 33 provides that no dealer or salesman of such dealer shall sell any security in this State unless registered in accordance with the Act. Violation in this respect is made a misdemeanor by § 22, 70 P. S. § 52. Section 2, 70 P. S. § 32 defines a security in this language: "The following terms shall, unless the context otherwise indicates, have the following respective meanings: (a) `Security'. The term `security' means any bond, stock, collateral trust certificate, transferable share, investment contract, certificate under a voting trust agreement, treasury stock, note, debenture, certificate in or under a profit sharing or participation agreement, subscription or preorganization certificate, fractional undivided interestin oil, gas, or other mineral rights, evidence of indebtedness, certificate of deposit for a security, certificate or instrument representing or secured by an interest in the capital assets or property of any company, other instrument commonly known as a security, or certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing . . ." (Italics added.) There is merit in this, the Commonwealth's appeal. In our view the subject matter of the sale as charged in each count was a security within the prohibition of the Act. The order will be reversed.
It is only the penal provisions of a law that must be strictly construed. Statutory Construction Act of May 28, 1937, P. L. 1019, Art. IV, § 58, 46 P. S. § 558. And courts may put a literal construction on a penal clause and a literal construction on a remedial clause in the same statute.Commonwealth v. Shaleen,
The language of the indictment limits the question to this: Under the statute is a "working interest in and to the net proceeds from the sale of . . . oil and gas . . ." the equivalent of a "fractional undivided interest in oil, gas or other mineral rights"? The lower court in effect held that the expression "oil rights", in Pennsylvania, has become a term of art with a restricted meaning referring only to oil in place, which is an interest in land; and since such interest in realty, alone, was referred to in the statute, personal property consisting in an interest in the net proceeds from the sale of oil and gas is not a security within the definition of the Act *279
and therefore not within its purview. It may be noted that a royalty interest in an oil lease, as the subject matter of sale, had been held1 not to be a security for the very reason that it was real property under The Securities Act of April 13, 1927, P. L. 273, which included "oil, gas or mining lease or certificate of any interest in or under the same", within the definition of a security. The precise question was before the Supreme Court of the United States in Securities E. Com'm v.C. M. Joiner L. Corp.,
At the argument, below, the defendants submitted a typical written sales agreement entered into by the corporation and the defendants, with each purchaser referred to in the indictment, for the information of the court in disposing of the motion to quash. This without objection was made a part of the record in the case. The written agreement in each instance recited that the corporation is the lessee of "a certain oil and gas Lease" of 110 acres of land in Tuscarawas County, Ohio, subject to "a royalty of 1/8 of the oil or gas produced" reserved by the owner of the land. In the agreement the corporation *281 agreed to begin at once the drilling of the well, for oil or gas, referred to in the agreement. From its terms it is clear that what the purchaser bought in each instance, as second party to the agreement, was more than a mere interest in the net proceeds from the sale of oil. The agreement provides that the corporation, the owner of the well under the lease, "upon written request of the party of the second part, will execute and deliver to the second party a recordable assignment of the second party's interest in said well, together with theportion of the leasehold comprising the curtilage surroundingsaid well of a radius of Twenty (20) Acres . . ." (Emphasis added.) The agreement also gave each purchaser a voice in the management of the well but provided for the appointment of the Corporation as "his true and lawful attorney for him and in his stead to operate and enter into contracts for the development and operation of said well . . ."
This appeal does not turn on the question whether the interest alleged to have been sold is personalty or realty. Both are within the contemplation of the Act. This from the opinion of Mr. Justice JACKSON in the Joiner case, supra, is equally applicable here: "In applying acts of this general purpose, the courts have not been guided by the nature of the assets back of a particular document or offering. The test rather is what character the instrument is given in commerce by the terms of the offer, the plan of distribution, and the economic inducements held out to the prospect. In the enforcement of an act such as this it is not inappropriate that promoters' offerings be judged as being what they were represented to be."
Order reversed; indictment reinstated with a procedendo.