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Lawskills.com Georgia Caselaw
ARNOLD v. MIXON.
SHARP v. MIXON.
47259.
47260.
PANNELL, Judge.
Action under Securities Act. Fulton Superior Court. Before Judge Tanksley.
1. The Georgia Securities Act, as amended (Ga. L. 1957, p. 134; 1959, p. 89; 1960, p. 957; 1963, p. 557; 1969, p. 235 [without consideration of the amendment by Ga. L. 1970. p. 488: 1970, p. 718]; Code Ann. Title 97) regulates the issuance and sale of securities, and the capital stork of a corporation is a security under the terms of the Art. Section 1 (i) (Code Ann. 97-102 (i)). Section 3 of the Act (Code Ann. 97-104) provides that "It shall be unlawful to sell air offer to sell any securities within this State, except those exempt under Section 5 [Code Ann. 97-106] or these sold in transactions exempt under Section 6 [Code Ann. 97-107], until registration of such securities . . ." It appears that only "a dealer, a limited dealer, or the issuer" may file for registration of securities under the Act (Section 3 (a) and (b); Code Ann. 97-104 (a) and (b)); and that an individual desiring to sell stock owned by him, not otherwise registered, would have to register as a limited dealer under Section 4 of the Act (Code Ann. 97-105). Section 13 of the Act (Code Ann. 97-114) provides that "[e]very sale, or contract for sale in violation of any of the provisions of this Act, or of any order issued by the commissioner under any provision of this Act, shall be voidable at the election of the purchaser." The purchasers in the present case claiming a violation of the Act tendered the stock back to the seller within the time provided by the law seeking recovery of the amounts paid by them, together with reasonable attorneys' fees and costs, as provided in Section 13 of the Act.
2. The last sale in the present case on August 1, 1969, was a sale by Mixon of 13,000 shares of MSA stork to Strategy, Inc., a North Carolina corporation engaged in buying and selling securities, and was a transaction exempted from the operation of Sections 3 and 4 of the Acts by Section 6 (e) (Code Ann. 97-107 (e)) which exempts "[t]he sale of any securities to any bank, savings institution, trust company, insurance company, corporation or dealer, or to any organization or association a principal part of whose business consists of the buying of securities." Nor was this sale converted into a transaction not exempt merely because the contract between Mixon and Strategy, Inc. provided for a breakdown of Mixon's 13,000 MSA shares sold at that time into seven stork certificates in denominations of 500 to 7,500 shares, and that they be endorsed in blank and be free of any transfer restrictions and not have any restrictions or legends thereon, and was subsequently sold in part by Strategy, Inc. to several different persons.
3. Also exempted by Section 6 of the Act in paragraph (c) (Code Ann. 97-107 (c)) is "an isolated transaction in which securities are sold by or for the account of the owner of the securities, whether through a dealer, a limited dealer, or otherwise, if such transaction is not one of repeated and successive transactions of a like character, and if such owner or his representative is not the issuer or underwriter of such securities."
The evidence shows conclusively the separate transfer by sale by Mixon of 1,000 shares of MSA stock to Sharp on April 15, 1969, and of 500 shares of MSA stock to Arnold on May 26, 1969, were but results of one transaction in which a sale resulted to two people, the delay in the consummation of the sale to Arnold being occasioned by Arnold's delay in making financial arrangements to consummate the sale. While there were successive sales, there were no successive transactions. See Vohs v. Jones, U. S. Dist. Court, Northern Dist. of Ga., #13820, decided August 23, 1972; Whitaker v. Jones, U. S. Dist. Court, Northern Dist. of Ga., #13821, decided August 23, 1972; Vohs v. Dickson, U. S. Dist. Ct., Northern Dist. of Ga., #13727, decided Sept. 28, 1972; Whitaker v. Dickson, U. S. Dist. Ct., Northern Dist. of Ga., #13728, decided Sept. 28, 1972; Brannan, Beckham & Co. v. Ramsaur, 41 Ga. App. 166 (152 SE 282); McWhirter v. Holmes, 49 Ga. App. 536 (176 SE 153), both of which last two cases are discussed in the Vohs and Whitaker cases. Also Kneeland v. Emerton, 280 Mass. 371 (183 NE 155, 87 ALR 1); Commonwealth v. Summons, 157 Pa. Super. 95 (41 A2d 697); Tarsia v. Nick's Laundry &c. Co., 259 Ore. 562 (399 P2d 28). Nor does the exempted sale to Strategy, Inc., it being a sale exempt otherwise than an isolated transaction, constitute a successive transaction of a like character to the transaction involving the sales to Sharp and Arnold. While successive sales (not exempt otherwise) might constitute "successive transactions of a like character" so as to prevent any one of such sales from being an isolated transaction, a sale entirely exempt as a transaction because of its own characteristics, can not be said to be a "successive transaction of a like character" to a sale exempt for other characteristics, that is, an "isolated transaction," so as to make the "isolated transaction" one not exempt. See Allen v. Schauf, 202 Kan. 348 (449 P2d 1010).
4. Accordingly, the trial judge did not err in granting Mixon's motions for summary judgment and in overruling the motions for summary judgment of Sharp and Arnold.
5. Whether or not the trial judge had authority to modify or vacate the summary judgments granted (see LeCraw v. Atlanta Arts Alliance, 126 Ga. App. 656, 663 (191 SE2d 572)), there was no error in refusing to vacate the summary judgments entered in the present case as the newly discovered evidence, considered in the present decision, does not require a different ruling.
These cases involve the sale by defendant-appellee, Shirley R. Mixon, to the plaintiffs-appellants, Donald D. Sharp, Jr., and Gray J. Arnold, of 1,500 shares of the Common Stock of Management Science America, Inc., hereinafter referred to as MSA. Plaintiffs' complaints were filed in five counts. Count 1 alleged a violation of the registration requirements of the Georgia Securities Act (Code Ann. 97-101 et seq.); all other counts were dismissed. The parties submitted the cases to the court on cross motions for summary judgment. On January 10, 1972, Mixon's motions were granted; Arnold's and Sharp's were denied.
On the hearing the facts appeared substantially as follows: Mixon was employed by MSA, a computer software company, in 1965. Arnold and Sharp were employed by MSA in January, 1967 and April, 1968. respectively. Throughout their tenure with MSA, Mixon's, Arnold's and Sharp's duties were largely technical; none of them were involved in MSA's management, nor were they officers or directors of the company. During the winter of 1967, Mixon, along with other employees of MSA, was given an opportunity to purchase MSA shares. Mixon purchased 200 shares. In March, 1968, MSA had a 100 for 1 stock split, and in April, 1968, Mixon purchased an additional 500 split shares from the company. At the end of MSA's 1968 fiscal year (November 30, 1968), Mixon owned 20,500 (1.3%) of the 1,645,000 shares of MSA common stock then outstanding. Mixon did not acquire any additional MSA shares after April, 1968. Both Sharp and Arnold had acquired options to purchase MSA shares under the employee stock option plan, but their options were not exercisable at the time they purchased their MSA stock from Mixon.
In the latter part of 1968, MSA management announced that a public offering of MSA shares was contemplated during 1969. At this time most employees of MSA were optimistic about the company's future business potential, and "there were many people who wanted to acquire stock in MSA at that point in time." Among those interested in purchasing MSA stock was the plaintiff Sharp. Joe Neely, Sharp's college roommate and an MSA shareholder and employee, had given Sharp access to information not generally available to employees but which Neely had obtained as a shareholder. Among other things, Neely told Sharp who the other shareholders of MSA were and how many shares each of them owned. Subsequently, Sharp and Mixon had a discussion which Sharp described as follows: "When Mr. Mixon and I were talking one day the subject came up about buying and selling stock and I said I was interested in purchasing [MSA stock] and he asked about the price and we talked a little about the price, and he said, 'Well, I may be interested in selling some of mine.' " Prior to this discussion with Sharp, Mixon had never considered selling any of his MSA shares, but after further discussion with Sharp, Mixon informed Sharp that he was willing to sell up to 2,000 of his 20,500 MSA shares. Thereafter, Sharp approached his friend Arnold, the other plaintiff in these two actions, and told him "[t]hat Mr. Shirley Mixon has some MSA stock that he was interested in selling, and that he--Don Sharp--was interested in buying some, and that he wasn't interested in buying all that was for sale. He wanted to see if I was interested in buying any." Arnold responded: "That--yes, that I was interested in obtaining some MSA stock." Sharp then informed Mixon of Arnold's interest, and Mixon agreed to sell 1,500 MSA shares to Sharp and Arnold. On April 25, 1969, Mixon transferred 1,000 MSA shares to Sharp. The closing with Arnold relating to the other 500 shares was delayed pending Arnold's arranging financing and occurred on May 26, 1969.
In July, 1969, Mixon took a leave of absence from MSA to work on a book he was writing. Shortly thereafter Mixon received a telephone call from John Whitaker, the president of Strategy, Inc., a North Carolina corporation engaged primarily in purchasing and selling securities. Whitaker told Mixon that Strategy, Inc. was a shareholder of MSA, that Whitaker had been discussing MSA's prospects with its management, and that Strategy, Inc. wished to purchase 13,000 shares of MSA stock from Mixon. Again, Mixon did not solicit the sale, but he did agree to make the sale because "It meant I could do what I wanted to do. I could write, teach." The Strategy transaction was closed in August, 1969. Mixon still owns 6,000 shares of MSA Stock.
On February 3, 1972, twenty-three days following the entry of summary judgment, plaintiffs each filed a motion for rehearing asserting that "[a]fter such bearing and order, plaintiff[s] discovered evidence indicating additional securities transactions between defendant Mixon and other persons and corporations . . ." The affidavit of Charles F. Barnwell, one of the three attorneys of record for plaintiffs, was filed in support of this motion. The "newly discovered evidence" upon which these motions were based consisted of short excerpts from depositions taken in two cases pending in the Federal District Court for the Northern District of Georgia, Atlanta Division, Whitaker v. Jones and Strategy, Inc. v. LaChance. This evidence indicated that Strategy, Inc. had re-transferred the MSA stock sold to it by Mixon to some other persons, but that Mixon had not been told that this additional transfer would be effected. Though Mr. Barnwell's affidavit stated that this "information was not known to plaintiff or plaintiff's counsel prior to January 21, 1972, after review of the files of the aforesaid cases pending in the United States District Court," the affidavit gives no reason for failing to review those files prior to judgment.
On February 8, 1972, Judge Tanksley denied plaintiffs' motions for rehearing on the ground that the evidence submitted in support of the motions "could have been discovered with due diligence by the movant" prior to judgment and on the further ground that the evidence failed to show further sales by Mixon in addition to those shown in the record prior to judgment.
Arnold and Sharp filed separate appeals to this court, enumerating error on the denial of their motion for summary judgment, the grant of the summary judgment in favor of Mixon and the refusal of the trial judge to re-open the case.
Kilpatrick, Cody, Rogers, McClatchey & Regenstein, Emmet J. Bondurant, Richard R. Cheatham, for appellee.
Shoob, McLain & Jessee, Charles F. Barnwell, Gerald H. Appleby, for appellants.
ARGUED JUNE 6, 1972 -- DECIDED NOVEMBER 15, 1972.
Friday May 22 14:20 EDT


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