APPEAL from the Circuit Court of Madison County; the Hon. G.
EDWARD MOORMAN, Judge, presiding.
MR. PRESIDING JUSTICE GEORGE J. MORAN DELIVERED THE OPINION OF THE COURT:
Plaintiffs appeal from a judgment of the trial court of Madison County wherein the court, sitting without a jury, held that the plaintiffs (appellants herein) were not entitled to rescind the sale of certain securities and thus could not recover the purchase price of the securities, together with interest and attorney fees. The trial court granted defendant's motion for a directed verdict as to some plaintiffs and entered judgment in favor of all named defendants and against all named plaintiffs, holding that statements made to induce the sales were mere "puffing."
Appellants have raised two issues on appeal. First, appellants contend that statements made by the individual defendants on behalf of the various corporations were untrue statements of material fact in violation of section 12G of the Illinois Securities Act of 1953 (Ill. Rev. Stat. 1973, ch. 121 1/2, par. 137-12G); second, appellants maintain that the sales of securities made by defendants were voidable under section 12A (Ill. Rev. Stat. 1973, ch. 121 1/2, par. 137.12A), for failure to register the securities with the Secretary of State pursuant to section 5 of the Act (Ill. Rev. Stat. 1973, ch. 121 1/2, par. 137.5).
During the course of the trial, appellants Charles Norville and Carl House testified that early in 1967 they talked with defendants Carman and Shearburn about buying stock in the proposed Alton Bigtop Restaurant. Mr. Norville testified that Shearburn stated that "the amount of interest that would be paid would be 15% to be paid quarterly" for a period not to exceed 3 years until the company went into operation. Norville paid $5500 for stock but received only five dividend checks. House testified that Shearburn and Carman told him that he "would get 15% or at the end of a three year period or prior to that (he) would get 5% of the gross," whichever totaled more. House paid $5500 for Bigtop stock but received only five dividend checks.
Appellant Fred King's testimony was essentially the same as that of Norville and House.
Appellant Denver McCollum testified that he invested $5500 in the proposed Alton Bigtop as the consequence of Shearburn's representations that he "would be paid 15% interest for three years until the restaurant was built," after which time he would receive dividends according to the net profits. After McCollum stopped receiving his quarterly checks, he complained to defendant Jones who stated that he felt that it was a mistake to have made the agreement to pay 15% dividends.
"He said that he felt that they should not have made the agreement to pay the 15% dividends that [they] were under capitalized to handle this sort of return. It was a mistake that they said they would pay the people 15% dividends."
He also testified that "they" meant the corporation, Carman, Jones and Shearburn and that in his conversations with Jones all the names were mentioned.
Odie Nichols testified that in February or March 1967 he spoke with Carman and Shearburn about buying stock in the Bethalto and Wood River Bigtop Restaurants. Shearburn and Carman told Nichols that he
"* * * would draw 15% to be paid quarterly for three years and at the end of three years (he) would have most of [his] money back in dividends and after that [he] would draw according to what the restaurants made. They said it may be 8% or might even run up to 20% according to how much they sold."
Nichols invested in both the Wood River and Bethalto Bigtop Restaurants and his dividends were discontinued after a few quarters.
Appellant Alma Hillier testified that she and her husband invested in the Wood River and Bethalto restaurants after meeting with Shearburn and Carman. Either Shearburn or Carman told the Hilliers that "if [they] bought shares * * * that [they] would receive 15% for the first three years," and that "after three years [they] would receive a certain amount for whatever the profits were." Mrs. Hillier stated that the words "promised" or "guaranteed" were never used, although she did emphasize that no conditions were attached to the 15% return. Dividends were discontinued after a few payments, although the few dividend checks that Mrs. Hillier did receive amounted to a 15% return on her investment at the time.
Charles Schoeneweis testified that in early 1967 he talked with Carman and Hamilton Jones about investing in the proposed chain of Bigtop Restaurants. He testified that he attended a public meeting at Jones's office at which both Jones and Carman were present. Jones presented the proposed operation and explained that stockholders would receive 15% dividends for 3 years after which time the restaurant would be in operation and stockholders would share the net profits. Subsequently, Carman and a Victor Green presented drawings and plans of the Bethalto restaurant at Schoeneweis's home. Because Schoeneweis did not have enough cash at the time, he borrowed $5500 at 6% interest from Jones to invest in the Bethalto Bigtop. Schoeneweis testified that no conditions were attached to the 15% dividends.
Appellant William Camp testified that he purchased shares of stock in the Bethalto Bigtop after Shearburn and Carman stated that he would receive a 15% return on his investment for a 3-year period. He testified that he received two quarterly payments after which time dividends were discontinued.
Appellant Paul Slaughter testified that early in 1967 he was approached by Bruce Carman who asked him to invest $15,000 in Bigtop stock. Slaughter rejected the proposal, but a short time later was again approached by Carman who told him that for a $5500 investment he would receive 15% interest or 5% of the profits, whichever was greater. Jones also guaranteed the greater of 15% interest or 5% of the profits for 3 years and promised to buy back the stock after 3 years if Slaughter were not satisfied.
Appellant Rebecca Lyford testified that in May 1967 she talked to Carman about investing in Bigtop stock. Carman presented the plans of the proposed operation and told her that she "would get 15% for three years and after that * * * [she] would get a share of the whole stock of the place." Ms. Lyford testified that Carman described no conditions.
Appellant Marion Bruns testified that she first heard about the proposed chain of restaurants through Victor Green, a personal friend, who drove her to Jones's office where they discussed investing in Bigtop stock. Both Jones and Green told Ms. Bruns that she "would receive 15% quarterly on the investment" for 3 years. Ms. Bruns decided to invest in the Wood River Restaurant and wrote a personal check which was payable to Jones, but never received any dividends.
Shearburn testified that as salesman for the Bigtop stock, he told certain plaintiffs that they would receive a 15% return to be paid quarterly for 3 years until the restaurants were in operation. He further stated that Carman instructed him on the 15% dividend rate and that he never told appellants about any conditions on the 15%. After receiving checks from some ...