Court: District Court of Appeal of Florida; March 17, 1988; Florida; State Appellate Court
The appellees, Louis Feldman, Eugene Clifford, David Kilpatrick, and Glenda Kilpatrick, faced 141 counts under the Florida Securities and Investor Protection Act. They filed motions to dismiss, which the trial court granted. The appellate court reversed this dismissal, reinstating the charges due to several critical issues. Most notably, only Clifford's motion was verified in compliance with rule 3.190(c)(4), allowing for the possibility of summary denial for the others, yet neither the state nor the trial court acted on this deficiency.
The appellate court criticized the trial court for overstepping its role by engaging in fact-finding, which is not permissible at this stage. The court noted that the trial judge improperly resolved factual issues, such as the classification of documents as "securities" and the role of Glenda Kilpatrick as an "agent," which should be determined at trial based on developed facts. The appellate court emphasized that the trial court must view evidence in the light most favorable to the state, a principle it found was not followed. Additionally, while Clifford's verified motion acknowledged offering a note secured by a mortgage, which could imply a lack of violation under the statute, this alone should not have led to dismissal of the charges against him.
The determination of whether a document constitutes a security requiring registration under the Sales of Securities Law hinges on the overall transaction rather than its form. The courts emphasize that multiple factors influence this classification, including the nature of the investment as represented in the offer, the distribution strategy, and the economic incentives provided by the sellers. In the current procedural context, the trial court's attempt to analyze the transactions was inappropriate, as it relied on vague, unsworn statements from the appellees' attorneys. Such determinations should be made through a trial. Consequently, the order dismissing the case is vacated, and the matter is remanded for further proceedings, with concurrence from Judges Scheb and Threadgill.
