It was 10 minutes after three on Jan. 16 when the telephone rang in the office of Jerome Walton, vice president and senior trust officer of American Security Bank.

The caller was Morris Offitt. Walton had never met him but recognized the name: a vice president of Salomon Brothers, the big New York investment house.

Offitt said "they were interested in purchasing a security which we had a large block of," Walton recalled later.

Offitt was cryptic. He wouldn't tell Walton the name of the stock, nor discuss terms of the offer, but he wanted to know if a decision could be made that day.

Yes, Walton assured him, it could be done; Offitt promised to call back in an hour, after the stock market closed.

Walton walked out of his office, alerted the 20 people who handle investments for American Security and waited for a second call, a call that would draw Washington's second largest bank into the most controversial corporate takeover fight in years, a fight that the Securities and Exchange Commission says will become a landmark case in securities law.

In a New York courtroom last week, SEC lawyers began trying to prove that The Sun Co. violated securities laws by a series of "widespread, lightening-like and surreptitious" stock purchases, launched by carefully orchestrated phone calls to banks, insurance companies and other institutional investors who the SEC contends became "pawns in a form of industrial warfare."

First Sun's investment bankers, Salomon Brothers, called to see if the investors were able and willing to make a quick decision. Then they called to make the pitch.

Offitt's second call to American Security came between 4:10 and 4:15, according to a 150-page deposition given the SEC by Walton, who has since left the bank to become a partner in an investment firm.

The stock Salomon Brothers wanted was Bectin Dickinson, a New Jersey medical supply company best known for its thermometers. The offer was a set of alternatives: $45 per share cash, or $40 and the promise that if a merger or tender offer was made for more than $40, the seller would get the higher price. The $45 offer was a 40 percent premium over the $32 maret price of BD shares.

Offitt stressed that a prompt decision was necessary and said the offer was only for stock held in sole discretionary accounts - pension funds, profit-sharing plans and trust accounts for which the bank had complete authority to make investment decisions; no clients were to be consulted about the deal.

It was a pressure play, even for what Walton described as "a very fast moving and volatile business . . . I felt I had an obligation to my clients to make a decision to sell the stock or not and do not to the best of my ability."

At that point, Walton recalled, he didn't know how much Becton Dickinson stock was owned by American Security trust accounts. There were hundreds of such accounts, and BD was only one of 100 stocks on the bank's holdings list.

Walton hung up and called together "every body - the portfolio managers, the trader, the entire research department, the fixed-income people."

"We were working like mad trying to make sure we had all the accounts," Walton told the SEC. Pouring through the printouts, the trust managers found they controlled 190.850 shares of BD, worth nearly $9 million at the price Salomon Brothers was offering.

It was a good price, Walton and his staff decided. "Basically we sat down, as I indicated, and made a judgment as to what both offers were worth, and we really believed that if we received $45 outright, that reinvesting those founds was worth, say, roughly $50 a share over the next year. And we thought the probability of someone coming in over $50 a share, if there was a possibility of a competing offer, was not high."

Shortly after 5 p.m. Walton called Offitt back. American Security would sell 170,000 shares of BD held by its discretionary accounts for $45 cash.

In less than two hours on a cold, quiet Monday afternoon, the bank had made its biggest stock deal of the year, selling securities worth $8.1 million and earning $3 million more than the market price.

Besides American Security, a who's who of institutional investors got phone calls from Salomon Brothers that afternoon - First National Bank of Chicago, First National Bank of Boston, First National Bank of Minneapolis, U.S. Trust Co., Bankers Trust Co., Hartford Fire Insurance Co., Travelers Insurance Co., Investors Diversified Services, Bank of America, T. Rowe Price Associates. Most of them sold.

Within 90 minutes, the SEC's pretrial brief contends, the phone solicitations produced offers for 3.8 million shares of BD, more than 20 percent of the company. "By early evening, holders of in excess of 5 million shares of BD's outstanding common stock" had agreed to sell, the SEC said.

The day's deals ltotaled more than $235 million.

It was only after the offers to sell had been received and accepted that the sellers learned who was buying their shares. Sun Co., the former Sun Oil Co., was behind Salomon. And behind Sun was Fairleigh Dickinson Jr., son of the man who founded Becton Dickinson, son of the man for whom Fairleigh Dickinson University is named.

Dickinson owned about 800,000 shares of the company and with his family controlled 1,141,854 shares - roughly 6 percent of the $600-million-a-year business.

Young Dickinson had fought for some time with the professionals running the company and in April 1977 found his job reduced to honorary chairman of the board.

Shortly after they stuck the "honorary" in front of his title and took away his job, Dickinson began plotting to regain control of the business, the SEC contends. As allies, he recruited Salomon Brothers, another stock brokerage firm, F. Eberstadt & Co. Inc., and a dissident member of BD's board, J.H. Fitzgerald Dunning.

In addition to the Dickinson family's shares and another 350,000 owned by Dunning and his brothers, the group counted on about 494,000 shares controlled by Eberstadt and affiliates to bring their holdings to 1.987 million, about 10.5 percent of BD's 19 million total shares.

The SEC contends the plan was to find another company that would use those shares as the base for taking over BD.

That intent itself was illegal, the securities regulators argue, because it was not made public. Section 13(d) of the Securities Exchange Act requires public notice whenever any group is formed to buy or dispose of more than 5 percent of the shares of a public company.

The telephone BD buying blitz was also illegal, the SEC contends, violating the 1968 Williams Act, which demands public disclosure of any attempt to gain control of a public company.

"What the defendants did here is a throw-back to the days prior to the enactment of the Williams Act," SEC lawyers argue. "They made no meaningful disclosure to investors," the government said, acting "in a manner deliberately designed to prevent investors from having the benefits of arguments from both sides so that the investor could decide for himself."

With the stock owned by Dickinson, Dunning and Eberstadt and the shares purchased in the Monday afternoon blitz, Sun acquired 34 percent of BD. The SEC contends that gave Sun "negative control" of BD, because it prevents anyone else from getting the two-thirds majority of shares needed for a merger.

The Sun Co., Salomon Brothers and Kenneth Lipper, a Salomon partner, Dickinson, Dunning, Eberstadt and Robert Zeller, Eberstadt's chairman, are defendants in the SEC's civil lawsuit, along with a paper corporation created by Sun to hold the shares of BD called LHIW Inc. The initials are short for Lets Hope It Works.

The SEC lawsuit asks the federal courts to issue injunctions prohibiting the defendants from violating securities laws, requairing them to make an offer of recission - offering to sell the BD stock back to any seller who wants it - and forcing LHIW to dispose of any stock that is not repurchased through the recission offer.

Sun Co. became the central character in the case after several other firms turned down proposals by Dickinson, Salomon Brothers of Eberstadt to try to merge with BD.

Avon Products, the ding-dong door bell cosemetics company, said it was interested only in a friendly merger. American Home Products Corp. sent an emissary to meet with BD management, but after BD's board voted 15-4 to reject any merger offer, AHP went home. Monsanto also was approached, as were Schering-Plough Corp. and Squibb Co.

The SEC charges that all these solicitations violated securities laws because the group trying to peddle its shares of BD did not make a public report.

Besides the seven-count securities law case brought by the SEC legal action, the case has raised other issues that could affect future takeover cases.

The role of Salomon Brothers has been questioned because the firm represented not only Dickinson but also Sun. Salomon was hired by Sun to advise it on a diversification program and wound up recommending a deal involving another client. On the first day of the trial, an SEC lawyer charged Salomon partner Lippert had lied to Sun officials by claiming another firm was ready to make a bid for BD if Sun did not.Was Salomon caught in a conflict of interest?

The telephone solicitations of BD shareholders resulted in dozens and perhaps hundreds of bank and insurance company employes learning of an above-market offer for a stock. At American Security, trust officer Walton warned his staff members they had inside information and were bound not to act on it or reveal it to others. But was that advice given or taken elsewhere?

Perhaps the broadest issue involves the insitutional investors who sold Becton Dickinson stock. They violated no laws and, as Walton told the SEC, acted in what they thought was the best interest of their clients. Institutional investors traditionally have been viewed as stable, long-term holders of securities. Many companies, including BD, have considered themselves immune from takeover raids because of the large blocks of their shares held by institutions. But if the SEC loses, and private solicitations of big shareholders are ruled legal, institutional investors may become the last ones companies want to hold their shares.