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Louisa Cola v. Terzano

Decided: June 5, 1974.

LOUISA COLA, PLAINTIFF,
v.
SPARTACO V. TERZANO, SIDNEY PACKER, CARVEL A. KLEE, I.I.S. FINANCIAL CORP., A PENNSYLVANIA CORPORATION, INTERAMERICA INVESTORS SERVICES, INC., DEFENDANTS



Van Tassel, J.c.c., Temporarily Assigned.

Van Tassel

This is a case involving the sale of unregistered stock in which the buyer seeks to invoke civil remedies under New Jersey's Uniform Securities Law, N.J.S.A. 49:3-47 et seq. In this regard it is a case of first impression in New Jersey.

The complaint and pretrial order sound in fraud and deceit; however, the court is permitting an amendment to conform to proof pursuant to R. 4:9-2, to include the violations of N.J.S.A. 49:3-47 et seq., since the facts alleged and testimony adduced provided reasonable notice as to the basis upon which relief was sought. See South v. West Windsor, 82 N.J.L. 262, 264 (Sup. Ct. 1912). R. 4:9-3 permits amendments to relate back to the date of the original pleading.

Spartaco V. Terzano was employed as a group manager of Interamerica Investors Services, Inc. (Interamerica) in the Hudson County area. As as agent of Interamerica he was authorized to sell shares of stock in I.I.S. Financial Corp.

(I.I.S.). Interamerica, a subsidiary of I.I.S., was a broker-dealer involved in the sale of mutual funds and insurance. Terzano was licensed to sell stock 14 years before the subject sale in this suit. He had attended an Investor's Planning Corp. formal training program relating to stock sales.

On January 14, 1971 Terzano visited the home of plaintiff Louisa Cola at the request of her son-in-law Ciriaco DiPalma. Terzano and the DiPalmas were to discuss the prospect of insurance for personal property within their home. Mrs. Cola owned the two-family home and was introduced to Terzano as a friend of DiPalma's for 20 years. Their discussion of insurance culminated in Mrs. Cola's purchase of a fire insurance policy on the house. DiPalma also purchased insurance from Terzano.

Thereafter, Mrs. Cola's nephew Mr. Barrota, who was seated at the living room table along with Terzano, Cola and the DiPalmas, began a discussion about investments in the Oppenheimer Fund. Terzano noted that this was a long-term investment and said that he was familiar with other investments which paid much more quickly. DiPalma then mentioned that Mrs. Cola had been involved in mortgage loans which paid 6% interest. Terzano replied that he knew of a company which "guaranteed" 9% "interest" as opposed to the 6%-7% flowing from mortgage investments. At the trial Terzano insisted that he used the word "dividend" and that plaintiff insisted that he used the word "interest" when discussing the terms of the investment. Terzano also claims that he used the word "return." He advised the group that his company had great potential, with offices "all over," and that an investment with his company would prove far more profitable.

Terzano remained at Cola's residence for approximately 2 I/2 hours during which time Mrs. Cola and Terzano discussed the details of an investment with Terzano's company. Louisa Cola, a 75-year-old foreign-born widow with no formal education, spoke very little English. She understood only,

through her son-in-law's translation into Italian, that she was investing her money in a Pennsylvania insurance company. She thought she was transacting an interest-bearing loan arrangement whereby she would receive a guaranteed 9% interest semi-annually. She was familiar with this type of arrangement since she had given mortgage investment loans through her attorney, Mr. Delchop, two or three times in the past, and in each had received back her capital and interest. According to her testimony, she was assured by Terzano that she could have her money back at any time; that if she died, her children would receive it and that the 9% interest semi-annually was "guaranteed." Terzano's own testimony corroborates the "guarantee" representation.

That night arrangements were made by Mrs. Cola and Terzano to finalize the deal. The other members of her family were not aware of this or the fact that on January 16, 1971 Terzano drove Mrs. Cola to the Oritani Savings & Loan where she drew a check for $15,000. She endorsed it for deposit only, payable to I.I.S., and gave it to Terzano. He then forwarded it to his home office in Pennsylvania and later received a commission on the sale. On March 16, 1971 Mrs. Cola received a letter from Sidney Packer which acknowledged her purchase of 150 shares of I.I.S. 9% preferred stock at $100 a share. Packer indicated that the shares were to convert to 40 shares of common stock on April 15, 1973 and that the shares were registered in his name until converted. No prospectus, financial statement or brochure of company information had been shown to Mrs. Cola. Only an Interamerica calendar with Terzano's card attached was produced as to the authenticity of the company and the subject transaction. The card indicated that Terzano was a manager for Interamerica.

Mrs. Cola had never owned or been involved in the purchase of any corporate stock, public or private, and was totally unfamiliar with such sophisticated investments. In March 1972 she sought the assistance of counsel for collection purposes. It was then that she first learned of the legal

significance and speculative nature of the January ...


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