Fed. Sec. L. Rep. P 94,562 Sam Bitter v. Hoby's International, Inc., a Corporation, Sam Bitter v. The Arizona Bank, a Corporation

Appellants brought these actions for rescission and damages, alleging that the agreement for a hot roast beef restaurant franchise offered by appellees constituted an unregistered security under the federal security laws. The District Court rendered summary judgment against appellants. We affirm.

I

Hoby’s International, Inc. was incorporated in Arizona in December, 1967, by A. J. Roberts for the purpose of engaging in the hot roast beef restaurant franchising business. Its capitalization consisted of Roberts’ contribution of $20,000.00 in equity. Subsequently, Roberts also contributed a $60,000.00 loan to Hoby’s to finance building the company’s model store, which opened in Phoenix during July, 1968. By November, 1969, Hoby’s had serious financial problems and Roberts sold stock to an employee, had his own loan repaid and departed for Florida to run the company from there. During this same period, two key employees resigned. The corporation ceased operation in April, 1970.

The Hoby’s franchises were publicly advertised and a total of three were sold. The first franchise was sold in 1968 to Adam Beef, which opened its restaurant in Scottsdale that December. Bitter…