Document: 449 U.S. 424 101 S.Ct. 698 66 L.Ed.2d 633 William RUBIN, Petitioner,v.UNITED STATES. No. 79-1013. Argued Nov. 12, 1980. Decided January 21, 1981. Syllabus Section 17(a) of the Securities Act 1933 prohibits fraud in "offer or sale" any securities. 2(3) defines "sale" as including "every . disposition a security interest security, for value," and "offer" attempt offer to dispose value." Petitioner was convicted conspiracy violate § by making false representations bank concerning shares stock pledged collateral loans. The Court Appeals affirmed, rejecting petitioner's contention that pledges did not constitute "offers" "sales" under 17(a). Held: pledge loan is an Pp. 428-431. (a) Obtaining secured unmistakably involves "disposition [an] value" within statutory definition. Although transfer less than absolute title, thus transferred nonetheless "interest security," it essential terms full title pass transferee transaction be "sale." 429-430. (b) When statute are unambiguous, judicial inquiry complete, except rare exceptional circumstances; no such circumstances present here. Treating included among comports with Act's purpose and, specifically, 17(a)'s protect against promote free flow information public dissemination economic considerations realities when lender parts value accepts securities similar important respects risk investor undertakes purchasing Both rely on themselves, both must able depend transferor's representations, regardless whether transferor passes only conditional defeasible secure repayment loan. 430-431. 2nd Cir., 609 F.2d 51, affirmed. Louis Bender, New York City, petitioner. Stephen M. Shapiro, Washington, D. C., respondent. CHIEF JUSTICE BURGER delivered opinion Court. 1 We granted certiorari this case decide 1933, 15 U.S.C. 77q(a). 2 * Late 1972, petitioner became vice president Tri-State Energy, Inc., corporation holding itself out involved energy exploration production. At time, experiencing serious financial problems. approached Bankers Trust Co., which he had frequently dealt while been affiliated accounting firm. initially refused $5 million operating mine. Nevertheless, lent $50,000 October 20, 30 days understanding if could produce adequate sufficient collateral, additional financing might available. 3 assisted other officers preparing statement submission bank. balance sheet, listed net worth $7.1 million, misleading several respects.1 also submitted inflated projections future earnings based large measure sham contracts forged documentation. Subsequently, personally paid officer $4,000 another official $1,000 inducements further borrowed $425,000 over brief period.2 Ultimately, loans were consolidated into single demand note $475,000, dated February 26, 1973. 4 required each new loan; between 19, 1973, six companies. stocks represented being good, marketable, unrestricted valued at total approximately $1.7 million;3 fact, they practically worthless. Many issued "shell" Most simply "rented"—i. e., from owner fee—to show otherwise restricted. In one instance, arranged fictitious quotations appear service reporting over-the-counter transactions used evaluating securities; another, planted, through others, advertisement overseas newspaper showed bank, representing quotation. Trading issue suspended shortly after issuing company account 900,000 its stock; replaced before learned difficulty. acted Tri-State's agent most these transactions. 5 A Justice Department request about received 28, two signed, prompted March payment three days. No made, May met officials tried forestall foreclosure. After loan, sued note. 6 proceeded guarantor signed confession judgment himself amount unpaid loans, plus accrued interest, but thereafter filed petition bankruptcy. recovered $2,500, expenses, $475,000 7 indicted counts violating conspiring various federal antifraud statutes, 77q(a).4 Following jury trial United States District Southern York, count. On appeal Second Circuit, raised grounds, 51 (1979).5 limited question sale." 445 960, 100 1645, 64 234 (1980). II 8 provides: 9 "It shall unlawful person sale use means instruments transportation communication interstate commerce mails, directly indirectly— 10 "(1) employ device, scheme, artifice defraud, 11 "(2) obtain money property untrue material fact omission state necessary order make statements light misleading, 12 "(3) engage transaction, practice, course business operates would operate deceit upon purchaser." 48 Stat. 84, amended, 77q(a) (emphasis added). 13 does deny engaged commit pledged; "securities" Act. Rather, contends narrowly Tr. Oral Arg. 6.6 To sustain contention, argues deposited sale. From implied power ripen thereby effecting foreclosure pledges, event occur without default 14 begin looking language E. g., Ernst & v. Hochfelder, 425 185, 197, 96 1375, 1382, 47 668 (1976). defined Act: "The term 'sale' 'sell' include every contract value. 'offer' of, solicitation buy, 74, 77b(3) 16 security." contemplated self-executing procedure could, option pledgee (the bank) default, vest ownership. parted substantial consideration—specifically, $475,000—and obtained inchoate valuable concomitant powers. It See, e. Gentile, 530 461, 466 (CA2), cert. denied, 426 936, 2651, 49 388 III 17 we find "in 'rare circumstances.' " TVA Hill, 437 153, 187, n. 33, 98 2279, 2298, 57 117 (1978) (quoting Crooks Harrelson, 282 55, 60, 49, 50, 75 L.Ed. 156 (1930)). Accord, Aaron SEC, 446 680, 695, 1945, 1955, 611 (1980); supra, 214, S.Ct., 1391 33. here, our reading wholly consistent history purposes 1933. Uniform Sale Act, model "blue sky" adopted many states, almost identical now appearing 2(3).7 Cecil B. De Mille Productions, Inc. Woolery, 61 45 (1932), Ninth Circuit construed provision California held definition embraced pledge. Congress subsequently enacted uniform verbatim. See Federal Hearings H.R. 4314 House Committee Interstate Foreign Commerce, 73d Cong., 1st Sess., (1933). generally id., 13; S. 875 Senate Banking Currency, 71 has cited nothing suggest intend broad scope cases arising given Lorillard Pons, 434 575, 581, 866, 870, 55 40 (1978). 18 have observed provisions Naftalin, 441 768, 774, 99 2077, 2082, 60 624 (1979); 195, 1382. respect shares. relying made securities, loan.8 19 us interpret way cramped conflicts plain meaning well. therefore hold here 17(a); accordingly, 20 Affirmed. 21 BLACKMUN, concurring judgment. 22 While I agree 77q(a), reach conclusion slightly different route holds confers constitutes 77b(3). Ante, 429. type "disposition" 2(3). (1976) (interpreting Act). Cf. 3(a)(14) Exchange 1934, 78c(a)(14) ("[t]he sell of"); Mansbach Prescott, Ball Turben, 598 1017, 1029 (CA6 1979) 1934 sheet receivable $7.5 copy purportedly formed basis account. item existed, signature forged. Evidence indicated tax liability offset asset. referred $264,000 cash hand coal $180,000. figures exaggerated. Subsequent November ($50,000), ($100,000), December ($275,000). 400,000 American Leisure Corp. (October 20—shell company; restricted); 2,000 All Life Insurance Co. (November 10—nonmarketable; "rented" owned Tri-State); 20,000 Marlin Investment 22—"rented" who told collateral); 100,000 Management Dynamics, (December 6—trading suspended; withdrawn 175,000 General 19—restricted); 50,000 Satellite Systems (January 19—restricted "rented"; planted). Count indictment charged his codefendants 1014 (fraud application), 1341 (mail fraud), 1343 (wire well (securities fraud). Counts alleged substantive violations 1014, respectively, some Proceedings severed trial. Government agreed dismiss charge application reached verdict, acquitted count fraud. divided evidentiary issue. rejected argument regarding comment. F.2d, 66. misrepresentations related themselves; allege conviction, insofar 17(a), condition itself. Thus, need omissions pertaining themselves can form violation National Conference Commissioners State Laws, Handbook 174 (1929) (Fourth Final Draft) ("sale" "include disposition, value"). extent there pledgees, very saw fit afford protection Commerce Clause, U.S.Const., Art. I, 8, cl. 3, ends inquiry, absent Constitution selected. "Our individual appraisal wisdom unwisdom particular consciously selected put aside process interpreting statute. Once enactment discerned constitutionality determined, comes end." 194, 2301,

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