The opinion of the court was delivered by: SHAW
This matter came on for hearing on the return day of an Order to Show Cause on June 29, 1962, and the Court, after examination of the moving papers and the Affidavits in support thereof, and the Counter-Affidavit of defendant, and after consideration of the arguments of respective counsel, concluded that there was a proper showing of reasonable probability of irreparable injury or harm to the public interest involved, unless, pending final disposition of the litigation, the preliminary restraint sought by plaintiff against all defendants was granted. Accordingly, the Court directed that a preliminary injunction issue and that an appropriate Order be submitted. The temporary restraint directed against all defendants was continued in effect during the interim.
An Order prepared by counsel for the plaintiff was submitted to the Court, and objections of the defendants as to the form and substance of the Order were heard in the presence of counsel for plaintiff on July 3, 1962. The substance of the objections by defendants was that the Order submitted was too broad in scope and went beyond the issues presented. Accordingly, it becomes incumbent upon the Court to set forth its findings of fact and conclusions of law and, in the light thereof, settle the form of the Order. The temporary restraint remains in effect subject to such further Order of the Court.
The following allegations of plaintiff, supported by and Affidavit of Joseph Nello, an investigator employed by the plaintiff, are not controverted by any factual statements in the Affidavit of John A. Tricoli, Jr. (the only Affidavit filed on behalf of defendants), and will be deemed admitted for the purpose of this motion:
1. Defendant F. S. Johns is a corporation incorporated under the laws of the State of New Jersey, and it maintains its principal place of business at 1994 Morris Avenue, Union, New Jersey. Since August 21, 1960, this corporation has been registered with the Securities and Exchange Commission pursuant to the provisions of Section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. 78j(b), as a broker and dealer in securities.
2. The defendant Diversified is a corporation incorporated under the laws of the State of New Jersey on January 24, 1961, and it maintains its principal place of business in a basement office located on the premises of F. S. Johns at 1994 Morris Avenue, Union, New Jersey. As of March 31, 1962, according to the First Quarter Report for that year of its operations, there were 225,680 shares of common stock and 36,720 shares of preferred stock outstanding.
3. Defendant Silver Springs is a corporation incorporated under the laws of the State of New Jersey and also maintains its principal place of business in the same basement office used by Diversified on the premises of F. S. Johns at 1994 Morris Avenue, Union, New Jersey. Silver Springs is engaged in the business of promoting and selling an undeveloped tract of 630 acres of land in the State of Florida. On or about March 6, 1962, defendant Joseph Edward Onello and the two other holders of all the outstanding 4,000 shares of Silver Springs common stock exchanged their stock for 181,200 shares of the common stock of Diversified whereby Silver Springs became a wholly-owned subsidiary of Diversified.
4. Defendant John A. Tricoli, Jr., is the president and a director of F. S. Johns, the vice-president and a director of Diversified, and, since on or about March 6, 1962, has been the treasurer and a director of Silver Springs. Defendant John Tricoli is a resident of the State of New Jersey. During the period in question, John Tricoli held substantial blocks of Diversified common stock having acquired 30,000 shares on February 15, 1961, as a promoter for the consideration of ten cents per share. These shares were transferred to F. S. Johns on or about September 6, 1961. An additional 70,000 shares were acquired by John Tricoli for one cent per share from defendant Onello on or about March 6, 1962, the same date they were acquired by Onello in the Diversified-Silver Springs transaction.
5. Defendant Lawrence Tricoli, the brother of the defendant John A. Tricoli, Jr., is the president and a director of Diversified, a securities salesman employed by F. S. Johns and, since on or about March 6, 1962, has been the secretary and a director of Silver Springs. He acquired 10,000 shares of the common stock of Diversified as a promoter on February 15, 1961, for the consideration of ten cents per share. This defendant is a resident of the State of New Jersey.
7. On or about January 24, 1961, Diversified commenced a public distribution to residents of the State of New Jersey of 25,000 units of its securities at $ 5 per unit, each unit consisting of three shares of preferred and two shares of common stock. This offering was terminated on or about September 21, 1961.
8. During the public distribution above mentioned between January 24, 1961, and September 21, 1961, F. S. Johns, acting as underwriter, offered and sold the aforesaid units of Diversified stock to residents of the State of New Jersey and, since on or about September 21, 1961, to date, F. S. Johns has been offering and selling stock of Diversified to residents of the States of New York and New Jersey, and trading, common and preferred stock of Diversified. During the underwriting, F. S. Johns received from public investors approximately $ 60,000 in sales, of which approximately $ 49,000 was remitted to Diversified.
9. Subsequent to September 21, 1961, the books and records of F. S. Johns reflect, in addition to purchases of a substantial amount of the common stock of Diversified from members of the investing public and other brokers and dealers, that the following acquisitions of the common stock of Diversified were made:
Date Amount Source
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9/26/61 30,000 shares John Tricoli
3/9/62 19,451 shares Conversion of Preferred
Total 49,451 shares
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