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Show PAGE EIGHT MONDAY, OCTOBER 14, 1974 INTERMOUNTAIN COMMERCIAL RECORD In The Supreme Court of The State of Utah realised that this Securities true of the Utah Uniform would when it is circumstances. This is particularly experi-ence- d include the fact that usually the seller of securities would be more be to observed it is and more knowledgeable than the buyer. However, a was licensed that that is not necessarily true. In this case. Mr. Hunter this transaction. broker, who himself manifest an interest in entering into Act which provides: Any person who offers or sells a security by means of any untrue statement of a material fact or any omission to state a material fact . . . (the buyer not knowing of the untruth or omission), and who does not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known of the untruth or omission, is liable to the person buying the security from him, who may sue either at law or in equity to recover the consideration paid for the security, With the foregoing in mind, we" turn to the arguments of the defendant Hunter that the trial court failed to give him the benefits conferred upon buyers of securities by the statute quoted above, but instead adhered too closely to the there are some difrequirements of common law fraud. It is recognized that the of parties: the Souvalls ficulties in this case because of the differing status as the owners and sellers charging fraud against Hunter, and defendant Hunter as buyer, seeking rescission based on the statute, and adding the charge of fraud against the plaintiffs and also against Zions Bank, the pledgeholder. . . . With respect to defendant's reliance on that statute, we acknowledge our agreement with certain propositions advocated by him: That its objective was to moderate the requirements of common law fraud, and the difficulties involved in its proof, by imposing a higher standard of ethics and responsibility upon the sellers of securities in placing upon them the affirmative duty of making full disclosure of all material facts; and concomitantly, it is intended to reduce the buyer's burden of investigation and inquiry, and make it easier for him to obtain redress on the basis of deception. Under its provisions a buyer need show a of the evidence that in making the sale the seller only by preponderance made an untrue statement or omission concerning a material fact; and that the buyer did not know of the untruth or omission. And, an aspect of this statute important to note, is that when the buyer has done so, the statute does change the burden of proof by expressly requiring the seller to show that he ". . . did not know, and in the exercise of reasonable care could not have known of the untruth or omission . . The first point we treat is as to the status of the intervening plaintiff, Zions Bank. Hunter argues that the court should have instructed the jury that the Zions Bank was. as a matter of law, the agent of Souvalls for whatever occurred in the transaction; and that it should be regarded as a seller of the securities and held accountable under the statute. In this regard the defendant is mistaken; and has taken an inconsistent position. As opposed to his present was argument that the jury should have been instructed that the Zions Bank Souvalls agent as a matter of law, his own brief states that "there was sufficient evidence to raise a jury question as to appellant's (defendant's) theory of agency . . .". Under the facts as herein above recited, we do not see that the jury was misled as to the position of the Bank, nor that the trial court committed any reversible error in failing to instruct as the defendant advocates. For a similar dis7. S.E.C. v. Texas Gulf Sulfur, 401 F. 2d 833, 854-85- 5. cussion of the adaption of the meaning of the terms scienter and intent re common law fraud, see S.E.C. v. Capital Gains Bureau, 375 U.S. 180, 192-19- 3. 8. Ellis v. Carter, footnote 5 above. 9. See S. E. C. v. Texas Gulf Sulfur, footnote 7 above. .". Although it is said that the intent of this statute is to eliminate the necessity of the buyer proving the seller's intent to defraud, the imposition of the remedy of rescission, which takes away the seller's rights under the contract, must necessarily be predicated on some blameworthy conduct on his part. As was correctly observed, by the Second Circuit Court, some form of the traditional scienter requirement is preserved . . . whether "... Upon consideration of this case in the light of the foregoing discussion, and of the fact that the court submitted to the jury all of the disputed material issues upon 25 special interrogatories, we think it unnecessary to detail the various claimed errors in the instructions relating to the mutual claims of fraud and the parties to whom they should or should not apply. It can fairly be said in summary that the essential issues of fact were presented to the jury in a form and manner not substantially inconsistent with the principles hereinabove set forth, and that their findings of fact shown by their answers completely defeat defendant's claimed right of recission. 2. See Stuck v. Delta Land etc. , 63 Utah 495, 227 P. 791; Pace v. Parrish, 122 Utah 141, 247 P. 2d 273. 3. This section of our act is sufficiently identical with Sec. 410(a)(2) of the Uniform Securities Act (U. L. A. ), and Sec. 12(2) of the Federal Securities Act of 1933 that we regard adjudications on those statutes as helpful to us. 4. See Harry Shulman, Civil Liability and the Securities Act, 43 Yale L. J. 227, 243, 244. 5. See Speed v. Transamerica Corp. , 99 F.Supp. 808, 831 (D. Del. 1951). 6. Ellis v. Carter, 291 F. 2d 270, 272 (9th Cir. 1961); Royal Air Properties " Inc. v. Smith, 312 F. 2d 210, 212 (9th Cir. 1962). it be termed lack of diligence, constructive fraud, or unreasonable or negligent conduct, . . . that. . . standard promotes the deterrent. objective of the rule. In response to the questions propounded, the jury answered: (1) that the Souvalls made no misrepresentation of material fact; (2) that the representations that they did make were not false; (3) that the Souvalls did not know, and in the exercise of reasonable care could not have known of untruth of representation or omission as charged by defendant; and (4) similarly and significantly, that they did not know that Universal Rockwell was in serious financial difficulty, in February and March, 1970, nor anticipate that its stock would become valueless. It can also fairly be said that the answers reflected a similar view of the facts, as adverse to defendant's contentions, and favorable to Zions Bank. Correlated to the above, it has also been said that this statute does not require the buyer to prove the element of his own reliance on the false representation. It is true that the statute does not expressly so state. But all of the law cannot be written in one sentence or one statute. This, and any other statute, must be considered in its relationship to the total fabric of the law and tie s 6 interpreted and applied as to be consistent with common sense, and with elemental principles of justice. It follows that the statute cannot fairly be understood as meaning that a buyer can naively or blindly purchase stocks without concern for the truth or reasonableness of representations made, then if it later develops that it would serve his interest, assert a claim of falsity of a representation about which he previously had no concern, and upon which he placed no reliance, as a basis for avoiding his contract. This is fairly deducible from the parenthetical clause in the statute quoted above (the buyer not knowing of the untruth or omission). The final claim of error we consider relates to the sustaining of an obto jection the offer in evidence of the plaintiff's S. B. A. loan application which the Zions Bank had collaborated in preparing. In sustaining the objection, on' the ground that it contained extraneous matter, the court stated that the ruling was without prejudice to the defendant offering it again later if he so desired. We have found in the record no such renewal of the offer; and defendant has pointed out none in his brief. The failure to reoffer it may have been because defendant's counsel made considerable use of it in Mr. Bennett; and he appears to have brought out whatever parts of it he desired in the presence of the jury. Accordingly, we do not find merit in this assignment of error for two reasons: (1) there was no renewal of the offer; and (2) in any event, we do not see how its exclusion could have had any material effect upon the trial. cross-examini- t In that regard, some notice should also be taken of the fact that the statute gives a remedy only for falsity of a "material" fact or omission. That also seems to import some, objective standard of reliance, because the determination of whether a fact is "material" can only be made in the frame of reference of the definition of what a material fact is: that is, it must be something which a buyer or seller of ordinary intelligence and prudence would think to be of some importance in determining whether to buy or sell. We see the overall picture of this case as falling within the observation we have made in numerous cases: that what the parties are entitled to is a full and fair opportunity to present their respective claims, their evidence in support thereof, and their arguments thereon, to the court and jury. When this has been accomplished, the verdicts and the judgment should be given a presumption of correctness and propriety; and they should not be overturned for mere irregularities or errors, but "only if it is shown that there is error which is substantial and prejudicial in that it appears that there is a reasonable likelihood that the result would have been different in the absence of such error, which we have ' of what has been said, we think that when all parts of this statute are considered together, it is both in harmony with its purpose of placing a higher responsibility upon the seller of securities and of easing the burdens upon the buyer, and in the interest of justice to both, that the buyer should be held to the traditional and practically universal standard of duty imposed throughout our law: that of reasonable care and prudence under the Asa consequence concluded does not exist here. Affirmed. Costs to plaintiffs (respondents). C.J. ll Hales v. 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