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Narum v. Faxx Foods Inc.3/18/1999
wever, "I suggest that each of you consult with your own attorneys to assist you in making decisions in regard to this matter, including the protection of your legal rights as investors in the company."
[ ] In April 1994, Faxx sued Saunders and Dakco in a Minnesota federal district court seeking $1,000,000 for breach of an agreement to sell Dakco to Faxx. Faxx informed North Dakota investors about this litigation in June 1994. The federal district court dismissed Faxx's lawsuit, concluding no enforceable agreement had been formed for Faxx's acquisition of Dakco. Faxx appealed to the Eighth Circuit Court of Appeals, which affirmed the decision on June 16, 1995.
[ ] The plaintiffs brought this lawsuit in August 1995 alleging violations of the Securities Act and actual fraud, and seeking $187,000 reimbursement for their stock purchases plus interest. Faxx, Olsen and Sweet did not answer the complaint and a default judgment was entered against them for $274,315.54. The other defendants answered and asserted the plaintiffs' action was barred by the one-year time limitation under N.D.C.C. § 10-04-17(1), and the actual fraud claim was derivative of the plaintiffs' securities law claim and was unsupported by any evidence. The plaintiffs argued the one-year time limitation does not apply in this case and, if it does, the defendants should be estopped from claiming its benefit. The plaintiffs also moved to amend their complaint to include an allegation of constructive fraud. The trial court granted summary judgment in the defendants' favor, concluding the plaintiffs' action is time barred. The court also denied the plaintiffs' motion to amend the complaint.
II.
[ ] On appeal the plaintiffs do not challenge the trial court's dismissal of their actual fraud claim, but assert the court erred in dismissing their securities law claim and in denying their motion to amend the complaint.
[ ] Summary judgment is a procedure for the prompt and expeditious Disposition of a controversy without trial if either litigant is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving the factual disputes would not alter the results. Ohio Cas. Ins. Co. v. Horner, 1998 ND 168, 9, 583 N.W.2d 804. On appeal, we review the evidence in the light most favorable to the party opposing the summary judgment motion. Freed v. Unruh, 1998 ND 34, 6, 575 N.W.2d 433.
A.
[ ] If corporate securities are sold in violation of the Securities Act, the corporate directors may incur liability to the purchasers of the securities, irrespective of the care and diligence they exercised, if they participated or aided in any way in making the illegal sales. See Schollmeyer v. Saxowsky, 211 N.W.2d 377, 386 (N.D. 1973); Weidner v. Engelhart, 176 N.W.2d 509, 518 (N.D. 1970). The statutory civil remedy for violating North Dakota securities laws and regulations is set forth in N.D.C.C. § 10-04-17:
"Remedies. Every sale or contract for sale made in violation of any of the provisions of this chapter, or of any rule or order issued by the commissioner under any provisions of this chapter, shall be voidable at the election of the purchaser. The person making such sale or contract for sale, and every director, officer, salesman, or agent of or for such seller who shall have participated or aided in any way in making such sale shall be jointly and severally liable to such purchaser who may sue either at law or in equity to recover the full amount paid by such purchaser, together with all taxable court costs, interest as provided in subsection 2, and reasonable attorney's fee
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