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05/06/87 Bruce A. Thoms Et Al., v. Private Ledger Financial

May 6, 1987

BRUCE A. THOMS ET AL., PLAINTIFFS-APPELLANTS

v.

PRIVATE LEDGER FINANCIAL SERVICES, INC. ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

507 N.E.2d 1327, 155 Ill. App. 3d 289, 107 Ill. Dec. 958 1987.IL.594

Appeal from the Circuit Court of Du Page County; the Hon. William E. Black, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE LINDBERG delivered the opinion of the court. NASH, J., concurs. JUSTICE INGLIS, Dissenting.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LINDBERG

This is an appeal from the dismissal with prejudice of the complaint of plaintiffs, Bruce A. Thoms and Patricia A. Thoms (Thoms), against defendants, Thomas C. Theodore and Tax and Investment Strategies, Inc. (Theodore), and defendant, Private Ledger Financial Services, Inc., by the circuit court of Du Page County. On January 12, 1987, the motion of appellants to dismiss that portion of their appeal involving Private Ledger Financial Services, Inc., was allowed and that part of this appeal was dismissed.

Plaintiffs' cause of action was based upon provisions of the Illinois Securities Law of 1953 (Securities Law) (Ill. Rev. Stat. 1983, ch. 121 1/2, par. 137.1 et seq.) which were in effect prior to January 1, 1984. Specifically, plaintiffs sought rescission of their purchase of certain limited partnership security interests based upon the terms of sections 4G, 12 and 13 (Ill. Rev. Stat. 1983, ch. 121 1/2, pars. 137.4G, 137.12, 137.13A).

On December 28, 1983, plaintiffs purchased limited partnership shares in the Missouri limited partnership known as Posada Del Rey Investors, Ltd. At that time, plaintiffs paid $9,230.77. They also executed a note for the balance due, with payments due on March 1, 1984, June 1, 1985, and June 1, 1986. All but the June 1, 1986, payment of $11,076.92 has been paid.

The purchase of the partnership interests was made by plaintiffs through Thomas C. Theodore, a salesman employed by Tax and Investment Strategies, Inc. The dealer of the partnership interests was Private Ledger Financial Services, Inc.

Thereafter, Posada Del Rey Investors, Ltd., the partnership which issued the limited partnership shares, was placed in bankruptcy. Defendant Jefferey Sunderman was a "controlling person" and general partner of Posada Del Rey Investors, Ltd.

The Posada Del Rey Investors, Ltd. partnership was not registered under the applicable provisions of the Illinois Securities Law of 1953 which existed prior to January 1, 1984. No "report of sale," as that term was utilized in section 4G of the Securities Law (Ill. Rev. Stat. 1983, ch. 121 1/2, par. 137.4G), was submitted to the Illinois Secretary of State identifying plaintiffs as purchaser of the limited partnership interest.

Three days after plaintiffs purchased the securities in question, the 1983 amendments to the Securities Law of 1953 went into effect. These amendments were contained in Public Act 83 -- 44 (1983 Ill. Legis. Serv. 840-41 (West)), which had been passed by the General Assembly on June 29, 1983, and approved by the Governor on August 4, 1983. Effective January 1, 1984, with regard to the report on sales of securities, the failure to file such a report would no longer affect the availability of the exemption from registration.

Defendant Jefferey S. Sunderman was served but failed to appear. An order of default against Sunderman was entered January 22, 1986. Defendant Theodore filed a motion to dismiss plaintiffs' complaint which was allowed with a finding that there was no just reason to delay appeal of the court's order. 103 Ill. 2d R. 304(a).

Plaintiff contends that for the purpose of the application of the Securities Law of 1953 that: (1) the date of the "sale" was December 28, 1983, and the law in effect on that date required the issuer, controlling person, or dealer to file with the Secretary of State a report of the sale not later than 30 days after the sale; (2) the failure to file the report was a violation of the Securities Law of 1953; and (3) plaintiffs are entitled to rescission of the sale for a violation of the filing requirement. Plaintiffs contend that the trial court erred ...


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