Texas Civil Statutes Section 33 Violations
Ins. Co. of North America v. Morris, 981 S.W.2d 667 (Tex. 1998), has interpreted 33F 2.
In that case an insurance company acted as a surety, guaranteeing promissory notes given by investors participating in syndicated oil and gas partnerships; as part of its duties it reviewed the private placement memoranda for compliance with the law.
Agents for the principal misrepresented the partnerships to investors; when they proved unprofitable, the investors defaulted. Id. at 671.
INA made good on its guarantee and sued the investors for indemnity; they counterclaimed for, among other things, TSA 33F violations. Id.
The trial court instructed the jury that to find INA liable as an aider, they had to find that there was a TSA violation and that INA was aware of the violations but recklessly disregarded the fact of the violation. Id. at 675.
Although a jury found liability under 581--33F, the supreme court found no evidence that INA was aware of the violation; the court so held even when the surety knew the president of the issuing company had been enjoined by federal authorities from offering unregistered securities like those being offered. Morris, 981 S.W.2d at 675-676.
The supreme court found the evidence did not show INA knew of an injunction in force at the time of the sale, and found that INA did not have a duty to disclose this information to the investors. Id. at 676.