Appeal from the Circuit Court of Cook County; the Hon. IRVING
GOLDSTEIN, Judge, presiding. Reversed and remanded.
MR. PRESIDING JUSTICE DEMPSEY DELIVERED THE OPINION OF THE COURT.
Moses and Roselyn Silverman brought this action to rescind the sale of securities made to them in violation of the Illinois Securities Law. Ill Rev Stats 1961, chap 121 1/2, pars 137.1-137.19, inclusive. The defendants moved for summary judgment, their motion was granted and the plaintiffs have appealed.
The summary judgment was predicated upon a finding by the trial court that the plaintiffs did not commence their action within the period of limitation prescribed in section 137.13D of the Act. The statute provides that no action shall be brought after three years from the date of the sale, and the issues in this appeal concern the sale and the date it was made.
The plaintiffs purchased from the defendants a 3% interest in the Envoy Hotels, Inc., an Illinois corporation which later changed its name to Chicago Ramada Inn, Inc. The first payment on the $9,900 purchase price was made on March 6, 1959, the second on March 19th, the third on May 5th and the last on October 20, 1959, at which time the plaintiffs received the stock and debentures evidencing their interest in the defendant corporation. Sometime thereafter the plaintiffs learned that the securities had not been registered in accordance with the provisions of the Securities Law and, after tendering the stock and debentures to the defendants and demanding a refund, they brought this action in July 1962 to recover the payments made by them.
The Illinois Securities Law of 1953 provides that, with certain exemptions, securities sold within this State must first be registered with the Secretary of State, section 137.5. Violations of this provision may impose criminal liabilities upon the seller of the unregistered securities. In addition, a civil action is created in the buyer by section 137.13A which provides that any sale in violation of the Act is voidable at the option of the buyer. The buyer may elect to tender the securities to either the seller or to the court and sue to recover the purchase money paid by him together with interest, costs and reasonable attorney fees.
The parties agree that the securities sold to the Silvermans were not registered; they agree that, under the Act, all persons participating in the sale are liable to the purchasers for the full amount paid by them; they also agree that purchasers who desire to avail themselves of the protective features of the Act must bring their action within three years from the date of the sale of the unregistered securities. They disagree, however, as to the application of the limitation provision to the dates involved in the sale and delivery of the securities in question.
The defendants contend that the statute ran from the date of the agreement to buy the securities and the first payment in March 1959. The plaintiffs contend that the statutory period did not start running until the last payment was made and the securities delivered in October 1959.
The question thus presented is when does the limitation period begin to run against a plaintiff who seeks to rescind an illegal sale of securities where the sale is entwined in a series of transactions. The answer to this question calls for an examination of the purpose of the Act and the interpretation of two of its sections: 137.13D and 137.2-5.
The legislative intent in enacting the Securities Law is clear. The Act has been called "paternalistic"; by it the State endeavors to shield its citizens from unscrupulous stock promoters. Registration with and approval by the Secretary of State is the primary safeguard, and comprehensive action against all participants in an unauthorized sale is the primary remedy. The purpose of the 1953 Act is stated in Meihsner v. Runyon, 23 Ill. App.2d 446, 163 N.E.2d 236, and the purpose of its predecessor, the Act of 1919, is set out in Foreman v. Holsman, 10 Ill.2d 551, 141 N.E.2d 31. In the Meihsner case the court said:
"The objective of the Illinois Securities Act is to protect innocent persons who may be induced to invest their money in speculative enterprises over which they have little or no control. The Act is paternalistic in character and should be liberally construed to better protect the public from deceit and prevent fraud in the sale of stock, bonds and other securities within the state."
In Foreman v. Holsman the court said:
"The Illinois Securities Act of 1919 was enacted for the protection and benefit of the public as a whole `to protect the public from the dishonesty, incompetence, ignorance and irresponsibility of persons engaging in the business of disposing of securities of uncertain value whereby the inexperienced and confident are likely to suffer loss.' (Stewart v. Brady, 300 Ill. 425, 442.)"
Mindful of the intent of the Act and the liberal construction which should be given to its provisions we turn to the two pertinent sections. In applying these sections to the facts of this case the trial court commented, after studying the briefs the parties had submitted to him, that no court had passed on the same problem. After reading the cases cited in the briefs filed in this court we are of like opinion. The cases are not in point and are not helpful; neither are the references to the Uniform Commercial Code, the Uniform Stock Transfer Act, the Business Corporation Act or to the former Uniform Sales Act. One or two cases from other jurisdictions have points of similarity but are distinguishable on their facts. None deal with a series of transactions such as confront us here. Section 137.13D provides:
"No action shall be brought for relief under this Section or upon or because of any of the matters for which relief is granted by this Section ...