FIREMAN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, APPELLANT,
v.
OSVALDO M. VENTO, APPELLEE
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Fireman's Insurance appealed a summary judgment order that rescinded a promissory note and discharged the debtor Vento from liability based on unregistered securities. The court reversed, holding that genuine factual disputes existed regarding whether Fireman's was a securities seller, whether required parties were joined, and whether contractual waivers applied.
The court reversed the summary judgment order, holding that it was error to grant summary judgment because (1) a factual question remained as to whether Fireman's was a seller subject to securities registration requirements; (2) the trial court lacked authority to rescind the contract without joining the partnership as an indispensable party; and (3) Fireman's was improperly denied the opportunity to assert a contractual waiver defense.
[1] A surety is not subject to securities registration requirements unless it is also a seller of the security.
[2] A party to a securities transaction is indispensable to any claim seeking rescission of that transaction.
Previewing 2 of 5 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“It was error to enter summary judgment for the following reasons. First, there remains a question of fact as to whether Fireman's was a seller of the limited partnership interest Vento purchased. Unless it was a seller, it would not be subject to the provisions of section 517.07.”
Establishes that Fireman's status as a surety, rather than a direct seller, creates a factual question about liability under securities registration law.
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Join FLexlaw to unlock all legal intelligenceVento purchased an interest in a limited partnership through his stockbroker and executed a $94,464 promissory note. Fireman's Insurance issued a sure…
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PER CURIAM.
This is an appeal from an order granting summary final judgment in a breach of surety contract case. We reverse.
Appellee Vento bought an interest in a real estate limited partnership called Crossings at Oakbrook Limited Partnership [hereinafter “Crossings”] through his personal stockbroker. Vento executed a promissory note in the amount of $94,464 to obtain his partnership interest. Appellant Fireman’s Insurance issued an investors’ bond indemnification guaranteeing Crossings’s lender the payments due under the promissory note. When Vento stopped paying on the note, Fireman’s, as surety, made payments on Vento’s behalf. Fireman’s then filed suit to recover payments it made.
Vento answered seeking rescission of the underlying contract he entered into with the Crossings. He raised affirmative defenses including fraudulent representation by his stockbroker and the limited partnership’s failure to register under Florida law. Vento then moved for summary judgment. The only proof offered by Vento in his motion was a certificate from the state insurance commissioner stating that the securities of the Crossings had not been registered pursuant to section 517.07, Florida Statutes (1989).
The court granted the motion on that basis. The order rescinded the underlying security transaction between Vento and the Crossings and discharged Vento from any further liability on the promissory note and investors’ bond. Fireman’s filed a motion for rehearing, a supplemental affidavit and amended pleadings, but all were denied.
It was error to enter summary judgment for the following reasons.
First, there remains a question of fact as to whether Fireman’s was a seller of the limited partnership interest Vento purchased. Unless, it was a seller, it would not be subject to the provisions of section 517.07. See Schneberger v. Wheeler, 859 F. 2d 1477 (11th Cir.1988) (bank which loaned money to limited partnerships based on the security to be provided by promissory notes of investors and letters of credit issued by the bank was not an offerer, seller, or agent of the seller of the limited partnership for purposes of liability under sections 517.07 and 517.301), cert. denied, 490 U.S. 1091, 109 S.Ct. 2433, 104 L.Ed.2d 989 (1989).
Moreover, section 517.07 contains various exceptions and exclusions which may protect Fireman’s should it be found to have been a seller.
Second, in its order, the trial court rescinded the underlying securities contract without requiring the joinder of the Crossings. This was error since the Crossings, as a party to the transaction, is indispensable to any claim seeking the transaction’s rescission.
Third, it was error to deny Fireman’s the opportunity to amend its complaint to set forth the defense that Vento waived any claims he might have against Fireman’s by express contractual provision in the surety bond. See In re Gas Reclamation, Inc., 733 F.Supp. 713 (S.D.N.Y.1990), reconsidered and expanded, 741 F.Supp. 1094 (S.D.N.Y.1990), appeal dismissed, 924 F. 2d 448 (2d Cir.1991); cf. Bankers Trust Co. v. Litton Sys., Inc., 599 F. 2d 488, 490-91 (2d Cir.1979).
Based on the foregoing, the order is reversed and the cause remanded for further proceedings consistent with this opinion.
Cases With Similar Vibessemantic neighbors from the corpus
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Allman v. Wolfe, 592 So. 2d 1261 (Fla. 2d DCA 1992)…ther parties is not possible.” Grammer v. Roman, 174 So. 2d 443, 445 (Fla. 2d DCA 1965) (citations omitted). In an action for rescission of a transaction, the parties to the transaction are indispensable. Fireman’s Ins. Co. of Newark, N.J. v. Vento, 586 So. 2d 89 (Fla. 3d DCA 1991); Coast Cities Coaches, Inc. v. Whyte, 130 So. 2d 121 (Fla. 3d DCA 1961). In the instant case, Wolfe prayed for rescission of the transaction. The Allmans, the Mintrones, and Wolfe were all parties to the transaction. In fact, the…
Authorities Cited
- Warren v. City of Lincoln, 490 U.S. 1091 (U.S. 1989)
- LDB Corp. v. Gibraltar Savings, 490 U.S. 1091 (U.S. 1989)
- Schneberger v. Wheeler, 859 F.2d 1477 (11th Cir. 1988)
- Bankers Tr. Co. v. Litton Sys., Inc., 599 F.2d 488 (2d Cir. 1979)
- Abish v. Nw. Nat'l Ins. Co. of Milwaukee, 924 F.2d 448 (2d Cir. 1991)