Smith v. Sherman

PEEK, P. J.

Plaintiff appeals from portions of a judgment which denied him recovery on certain claims previously filed by him in the estate of L. E. Sherman, deceased, for sums allegedly due him pursuant to oral agreements with decedent.

Decedent was a licensed real estate broker who was active in promoting the construction of tract homes and multiple dwellings. In order to finance these projects, he would induce persons to invest various sums for which they would receive receipts representing proportionate shares, or interest, in the prospective profits to be derived from the sale of the improved properties. For some time prior to his death, decedent had employed plaintiff as a salesman.

The only evidence offered by plaintiff at the trial in support of his contentions, all of which was admitted over defendant’s objections, was that in certain previous development projects dating back over a period of several years, plaintiff and decedent had split profits earned in the promotion of these ventures; that decedent had been overheard to tell plaintiff that he would be paid the sum of $2,250 as compensation for sales of investment units in one of the projects; that he had done certain technical work in the development of the plans and specifications; that he had acted in the nature of a liaison between the contractor and decedent; and that he had performed certain manual work on one of the projects.

Since we conclude that the investment units in the projects were securities within the meaning of the Corporate Securities Act, it would seem wholly unnecessary to discuss the evidence in greater detail or the validity of the objections thereto. Furthermore, since it was stipulated at the trial that no permit had been obtained from the Division of Corporations, nor were plaintiff or decedent licensed as brokers or agents, they there

[95]

fore were

in pari delicto,

and hence plaintiff cannot recover compensation for the selling of the units or shares and the profits of the tainted ventures.

The projects in each case involved the construction of duplexes and private dwellings on tracts of land, and the sale of the completed units to the general public by decedent. The money to finance the developments was primarily obtained by the sale of the investment units to the public, which stipulated that the investor would be entitled to a designated share of any profit made in the project upon its completion in each instance. The investment units were evidenced by certain so-called deposit receipts given to the investor. It is not clear how many units were sold in each venture, except that by plaintiff’s evidence at least 30 units, representing an investment of $15,000 by eight people, were sold in the Fruitridge Terrace project, investments totaling over $17,000 by five people in another, and $11,000 by six people in the third. It further appears that the investments were solicited by plaintiff, the master agreement in each case providing that decedent was to receive a share in the profits for his promotional work. It is half of this money which plaintiff is endeavoring to obtain in the first part of this action.