## Facts

- T. Morris Hackney agreed to purchase, and did purchase, all outstanding shares of Banton, Inc. from James F. Banton and Jane J. Long.
- Hackney alleged he paid $1.1 million in cash and executed guarantees totaling about $5 million of corporate debt as part of the transaction.
- Hackney alleged Banton and Long made untrue statements and omitted material facts about Banton, Inc.’s financial condition and operating results in connection with the stock sale.
- Hackney sued for common-law fraud and for civil liability under Alabama securities statutes, alleging misrepresentations and omissions in the offer and sale of securities.
- Hackney sought equitable relief imposing a constructive trust over the purchase money and any assets acquired with, or benefited by, those funds.
- The trial court granted preliminary equitable relief (including constructive-trust/injunctive relief) and entered partial summary judgment on aspects of Hackney’s statutory claims.
- Banton and Long appealed, challenging the judgment and the equitable remedies.

## Issues

1. Whether alleged misrepresentations and omissions in the sale of all shares of a corporation support civil liability under Alabama’s securities laws and under common-law fraud.
2. Whether a purchaser may obtain constructive-trust relief tracing stock-sale proceeds into the sellers’ property at the preliminary-injunction/partial-summary-judgment stage.
3. Whether Alabama’s statutory securities remedies displace, limit, or coexist with equitable remedies such as constructive trust in a securities-sale dispute.

## Decision

- The Alabama Supreme Court reversed the trial court’s judgment and remanded for further proceedings.
- The Court denied the requested writ.
- By reversing, the Court rejected the trial court’s grant of relief as entered, including the equitable constructive-trust/injunctive relief and associated partial summary judgment.

## Legal Principles

- The sale of corporate stock is a “securities” transaction subject to Alabama’s Blue Sky Law.
- Alabama’s civil-liability provision for securities sales (commonly treated under Ala. Code § 8-6-19) is modeled on federal Securities Act § 12 concepts and centers on material misstatements or omissions made in connection with a securities sale, without requiring the same proof of intent demanded by common-law fraud.
- Statutory securities remedies are generally rescissionary in structure (return of consideration, subject to offsets), rather than open-ended tort recovery.
- Constructive trust and tracing remedies in a securities-fraud setting require careful justification and must be consistent with the statutory remedial scheme; broad constructive-trust orders entered on a limited preliminary record are subject to reversal.

## Conclusion

The Alabama Supreme Court set aside the trial court’s securities-fraud and constructive-trust relief arising from Hackney’s purchase of Banton, Inc. stock, reversed the judgment as entered, and remanded for further proceedings applying the governing statutory standards and limits on equitable remedies.


Banton v. Hackney, 557 So. 2d 807 (Ala. 1990)