Court Opinion

ID: 9691603
Source: CourtListenerOpinion
Date Created: 2023-08-24 20:42:41.444345+00
Date Added: 2024-06-11T18:19:23.312624
License: Public Domain

Gribbs, J.
(concurring in part and dissenting in part). I respectfully dissent from only those portions of the majority opinion that reverse the order of the trial court with regard to the appellants’ claim under MCL 451.810; MSA 19.776(410) and reject the sale of business doctrine.
There are no Michigan cases dealing with this specific issue, and federal court interpretations of the federal securities acts are not binding on this Court. Dep’t of Commerce v DeBeers Diamond Investment, *720Ltd, 89 Mich App 406, 410; 280 NW2d 547 (1979). After review of the Landreth decision of the United States Supreme Court,1 I find myself in agreement with the dissent by Justice Stevens.
In his dissent, Justice Stevens argued that the federal securities acts were not intended to apply to the sale of a business that included all the stock of the business in a closely held corporation. He would have affirmed the unanimous decision of the case by the United States Ninth Circuit Court of Appeals. 731 F2d 1348 (CA 9, 1984). The Ninth Circuit Court of Appeals applied the sale of business doctrine and held that the Landreth sale was a routine commercial transaction and that the sale of one hundred percent of the stock of a closely held corporation was not a transaction involving a security within the meaning of the securities acts because the buyer assumed full control of the corporation and was not an “investor” expecting profits from the efforts of others.
The circuit court opinion in Landreth noted that the federal courts and numerous commentators have been divided for many years on the sale of business doctrine and on the question whether stock purchased as part of a business is a “security” within the meaning of the federal securities acts. The circuit court opinion cited many cases, as well as law review and bar journal articles dealing with the issue. 731 F2d 1351-1352, ns 2-10.2
*721In its written opinion, the circuit court in Landreth reasoned:
The sale-of-business doctrine rests upon the premise that the Acts apply only to investment transactions, and not to commercial or entrepreneurial transactions. See e.g., Sutter v Groen, 687 F2d [197, 201 (CA 7, 1982)]. The doctrine *722derives from [United Housing Foundation v Forman, 421 US 837; 95 S Ct 2051; 44 L Ed 2d 621 (1975)], in which the Court stated:
“The focus of the Acts is on the capital market of the enteiprise system: the sale of securities to raise capital for profit-making purposes, the exchanges on which securities are traded, and the need for regulation to prevent fraud and to protect the interest of investors.”
421 US at 849; 95 S Ct 2059. The court added “Congress intended the application of these statutes to turn on the economic realities underlying a transaction, and not on the name appended thereto.”. . .
. . . Although the transaction involves stock, the economic realities reflect acquisition of a business, not passive investment, and the Acts therefore do not apply. . . .
[B]oth the sale-of-business doctrine and the risk capital test. . . . reject a literal reading of the statute in favor of an inquiry into the economic realities of the underlying transaction [731 F2d 1352.]
In a recent opinion, the Michigan Supreme Court found that a statute may “plainly contemplate” authority for an extraordinary procedure even where a literal or specific proviso is absent.3 In my review of the Michigan version of the Uniform Securities Act, MCL 451.501 et seq.; MSA 19.776(101) et seq., I conclude that the statute plainly contemplates the regulation of passive investments and not the acquisition of an entire business. The sale at issue included various equipment (eventually repossessed and sold by Robert Sparling for $70,000), accounts receivable amounting to approximately $40,000, an inventory estimated at $95,000, and a bank account of approximately $15,000, in addition to other assets.
*723The trial court correctly concluded that the “arms-length transaction” was the sale of a business and that the appellants “took over the business” and operated the business for more than a year before ceasing operations entirely and abandoning the property.
I would affirm the entire judgment of the Wayne Circuit Court.

 Landreth Timber Co v Landreth, 471 US 681; 105 S Ct 2297; 85 L Ed 2d 692 (1985).

 The circuit court’s footnote 2, in its entirety, provides:
2. Compare Seldin, When Stock is Not a Security: The “Sale of Business” Doctrine Under the Federal Securities Laws, 37 Bus Law 637 (1982); Thompson, The Shrinking Definition of a Secur*721ity: Why Purchasing All of a Company’s Stock is Not a Federal Securities Transaction, 57 N Y U L Rev 225 (1982); Note, The Security Status of Stock Transfers Incident to the Purchase of a Business: The “Sale of Business" Controversy in the Aftermath of Golden v Garafalo, 47 Alb L Rev (1983); Note, Function Over Form: The Sale of Business Doctrine and the Definition of “Security," 63 B U L Rev 1129 (1983); Note, The Sale of Business Doctrine: A Decade After Forman, 49 Brooklyn L Rev 1325 (1983); Comment, Acquisition of Businesses Through Purchase of Corporate Stock: An Argument for Exclusion from Federal Securities Regulation, 8 Fla St U L Rev 295 (1980); Note, The Sale-of-Business Doctrine — Golden v Garafalo, 1983 B Y U L Rev 201 (1983); Note, The Second Circuit Rejects the Sale of Business Doctrine, 57 Tul L Rev 715 (1983) (all endorsing the sale of business doctrine) with Black, Is Stock a Security? A Criticism of the Sale of Business Doctrine in Securities Fraud Litigation, 15 U C D L Rev 325 (1983); Hazen, Taking Stock of Stock and, the Sale of Closely Held Corporations: When is Stock Not a Security?, 61 N C L Rev 393 (1983); Karjala, Realigning Federal and State Roles in Securities Regulation through the Definition of a Security, 1982 U Ill L Rev 413; Prentice & Roszkowski, The Sale of Business Doctrine: Relief from Securities Regulation or a New Haven for Welshers?, 44 Ohio St L J 473 (1983); Rapp, Federal Securities Laws Should Protect Some Purchases of All or Substantially All of a Corporation’s Stock, 32 Case W Res 595 (1982); Comment, A Criticism of the Sale of Business Doctrine, 71 Calif L Rev 974 (1983); Note, Repudiating the Sale-of-Business Doctrine, 83 Colum L Rev 1718 (1983); Note, 61 Wash U L Q 659 (1983) (repudiating the sale of business doctrine). See also Fitzgibbon, What is a Security? — A Redefinition Based on Eligibility to Participate in the Financial Markets, 64 Minn L Rev 893 (1980); Note, Recent Ninth Circuit Developments in Securities Law, 13 Loy L A L Rev 985 (1980); Comment, Securities Regulation: Application of the Federal Securities Laws to the Sale of a Closely Held Corporation, 22 Washburn L J 406 (1983); Note, Continuing Confusion in the Definition of a Security: The Sale of a Business Doctrine, Discretionary Trading Accounts, and Oil, Gas, and Mineral Interests, 40 Wash & Lee L Rev 1225, 1280 (1983). [731 F2d 1351.]

 In re Wirsing, 456 Mich 467, 474; 573 NW2d 51 (1998).