The opinion of the court was delivered by: LEVET
This is a motion for a preliminary injunction restraining the defendants from offering to sell and selling shares of the common stock of the Franklin Atlas Corporation and from carrying or causing to be carried through the mails or in interstate commerce such securities for the purpose of sale or delivery after sale unless and until a registration statement is in effect.
The plaintiff in its complaint charges that the defendants are about to engage in acts and practices which constitute violation of certain sections of the Securities Act of 1933 (15 U.S.C.A. § 77q(a), et seq.).
The defendants are identified as follows: Franklin atlas Corporation (hereinafter called Franklin) is a New Youk corporation with its principal office at 80 Wall Street, City, County and State of New York. John L. de Lyra is a resident of the County of Kings, New York, and is alleged to be in control of the management of Franklin. I.W. Page & Co., Inc. (hereinafter called Page) is a New Youk corporation with its principal management of Franklin. I. W. Page & now registered as a broker-dealer in securities pursuant to Section 15(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78o(b). Jack Gold is an officer and sole stockholder of Page. Walter Elmatti is a resident of Kings County, New Youk, and a son-in-law of Emanuel de Lyra, who is a brother of John L. de Lyra.
The complaint further alleges that since on or about April 1, 1956, the defendants have been and are now selling shares of Class A common stock of Franklin in interstate commerce and causing the same to be carried through the mails, and that no registration statement with respect to such securities is in effect with the Commission. The complaint also alleges that the defendants are making or causing to be made untrue statements of material facts and omitting to state material facts.
First issue -- misstatements. Franklin reputedly is engaged in an attempt to erect an office building in the vicinity of Wall Street at the northeast corner of Wall and Pearl Streets, in the Borough of Manhattan, City and State of New York. The alleged misstatements relate to property in this area. The facts in connection therewith will be hereinafter set forth.
The second issue is whether or not certain stock issued by Franklin (Tufaro stock) is or is not exempt from registration and is or is not controlled stock.
The third issue is whether or not Page and Gold should be subjected to preliminary injunction.
The particular misstatements set forth in the motion papers are as follows:
1. In a circular designated 'Special Report,' marked Exhibit A and attached to plaintiff's motion papers, the following statement appears:
'Major Project In Wall Street Area -- The most important step of the company's present activities is centered around its current project which is the construction of a modern office building on Wall Street. A 33-story structure was originally planned. Now however, because of the tremendous inquiries and requests for space in the proposed building far exceeding the footage available, Franklin Atlas is re-planning and negotiating for the acquisition of additional abutting land required to build a 55-story skyscraper.' (Italics supplied.)
Apparently the plaintiff claims that the italicized portions are untrue.
2. Another bulletin in reference to Franklin, entitled, 'An Investment in Real Estate Teamwork and Experience,' Exhibit B attached to plaintiff's motion papers, contains, among other things, the following statements;
'* * * The new skyscraper will be built on Wall and Peal Streets with entrances on Wall, Pearl and Water Streets.
'* * * negotiations with the famous Angelo's Restaurant that made possible the acquisition of an adequate plot for the International Building are an excellent case in point.'
3. An article published in The New York Times on May 6, 1956, which appears on the back of Exhibit B attached to the motion papers, states, among other things:
'A site has been assembled and plans have been completed for a thirty- three-story office building at the northeast corner of Wall and Pearl Streets. * * * It will have entrances on Wall, Peal and Water Streets.
'The Pearl Street building, which was purchased by the Franklin Atlas Corporation from Angelo Calcagnini, * * *.'
The facts with reference to Franklin's interest in property in the Wall Street area concerned herein are as follows:
1. On or about April 19, 1956, Franklin and the Estate of Angelo Calcagnini entered into a memorandum for the sale and purchase of premises at 160-162 Pearl Street at the price of $ 400,000. (See Exhibit A attached to affidavit of John L. de Lyra.) A more formal contract with respect to said premises was entered into by these parties on June 1, 1956.
2. On June 1, 1956, Angelo's Restaurant, which is adjacent to 80 Wall Street on the north, and Franklin entered into an agreement whereby Franklin agreed to purchase and Angelo's Restaurant agreed to sell certain equipment in and owned by said restaurant. (See Exhibit B attached to affidavit of John L. de Lyra.)
3. On April 12, 1956, the stockholders representing all of the issued and outstanding common and preferred stock of Anasae Realty Corporation (hereinafter called Anasae) as sellers, and Franklin as purchaser, entered into a contract for the sale of all of the stock of Anasae to Franklin at a purchase price of $ 1,000,000. (See Exhibit F ...