This is an action against a corporation and its sole shareholder-director for payment on a demand note and for damages based upon allegations of material misrepresentations in the sale of a security and various violations of the New Jersey Uniform Securities Law.
The essential facts are as follows: In return for a consideration of $20,000 supplied by plaintiff's mother, Mary Ann Durfee Stites, defendant ILB Investment Corporation (ILB) executed a document on or about May 24, 1976 wherein it promised to repay after 30 days' written notice the principal sum plus interest at 12% a year after 12 months. In June 1978 Mrs. Stites assigned her interest in the ILB note to her daughter, Jane McIntyre, plaintiff herein.
On July 25, 1978 plaintiff demanded in writing the sum due to her. Repayment was not made, however, and this suit was instituted on August 7, 1978.
Thereafter, plaintiff moved for summary judgment on counts 1, 7, 8 and 9 of the complaint. Judgment was granted in plaintiff's favor on the first count which sought recovery of the $20,000 paid to ILB plus interest at 12%. This court held that the document executed by the parties on May 24, 1976 was clearly a note which entitled plaintiff to payment in full according to its express terms.
Judgment was reserved on counts 7, 8 and 9 which sought damages in the amount of $20,000 plus 12% interest a year against the corporate defendant and its sole shareholder-director, Ira L. Blaine, for violations of the New Jersey Uniform Securities Law, N.J.S.A. 49:3-47 et seq. With respect to this part of the motion plaintiff submitted official findings of fact and conclusions of law prepared by the New Jersey Bureau of Securities as a result of hearings held on October 25 and 26, 1977, in which defendants herein were charged with various violations of the State's securities law, N.J.S.A. 49:3-47 et seq. Plaintiff's position is that since these findings established that
both defendants sold unregistered securities which were required to be registered to certain named investors and that same was accomplished by material misstatements of fact and materially misleading omissions, defendants should be "collaterally estopped" from relitigating the issues concerning the Securities Law violations in the present suit.
Defendants promptly filed a cross-motion for dismissal of counts 7, 8 and 9 based on the two-year statute of limitations in N.J.S.A. 49:3-71(e). In her answering brief plaintiff argued that the statute of limitations had not been raised as an affirmative defense and drew an analogy to the "discovery rule" in tort law which permits the tolling of the limitations period until the injured party discovers or should have discovered the injury. See Lopez v. Swyer , 62 N.J. 267 (1973). Furthermore, plaintiff argued that defendants were "estopped" from relying on the statute of limitations by virtue of their conduct in employing delaying tactics.
Pursuant to R. 4:5-4 defendants then moved successfully to amend their answer to include the limitations defense.
Since dismissal of counts 7, 8 and 9 based upon a statute of limitations would render plaintiff's motion for summary judgment on these counts moot, that issue must be resolved first.
In counts 7 and 8 plaintiff alleges that defendants willfully offered and sold unregistered securities in violation of N.J.S.A. 49:3-60 and 49:3-70(b), and that same was accomplished by making untrue statements of material facts and by omitting to state material facts necessary in order to make the statements not misleading in violation of N.J.S.A. 49:3-52 and 49:3-70(b). Count 7 seeks judgment against ILB and count 8 seeks judgment against defendant Blaine as the person controlling the selling entity, N.J.S.A. 49:3-71(b). Both counts demand damages under the civil liabilities section of the Securities Law, N.J.S.A. 49:3-71. That section gives the buyer of a security the right to sue to recover the consideration paid, together with
interest at the rate of 6% a year from the date of payment and costs, less the amount ...