645 F.2d 404 (5th Cir. 1981), 79-1058, Williamson v. Tucker

Docket Nº:79-1058.
Citation:645 F.2d 404
Party Name:John D. WILLIAMSON et al., Plaintiffs-Appellants-Cross Appellees, v. Gordon G. TUCKER et al., Defendants-Appellees-Cross Appellants.
Case Date:May 20, 1981
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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645 F.2d 404 (5th Cir. 1981)

John D. WILLIAMSON et al., Plaintiffs-Appellants-Cross Appellees,

v.

Gordon G. TUCKER et al., Defendants-Appellees-Cross Appellants.

No. 79-1058.

United States Court of Appeals, Fifth Circuit

May 20, 1981

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E. Eldridge Goins, Jr., Dallas, Tex., for plaintiffs-appellants-cross appellees.

Howard V. Tygrett, Jr., Dallas, Tex., for Godwin.

Gordon H. Rowe, Jr., Dallas, Tex., for Trustees, et al.

Stan McMurry, Ronald G. Houdyshell, Robert B. Payne, Dallas, Tex., for Tucker.

E. Glen Johnson, Dallas, Tex., David P. Seikel, Houston, Tex., for Ken Good and Good Fin.

Appeals from the United States District Court for the Northern District of Texas.

ON PETITIONS FOR REHEARING AND PETITION FOR REHEARING EN BANC

(Opinion December 11, 1980, 5 Cir., 632 F.2d 579).

Before GODBOLD, Chief Judge, and GARZA and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

IT IS ORDERED that the petition for rehearing filed by the plaintiffs-appellants in the above entitled and numbered cause is hereby DENIED and, no member of this panel or judge in regular active service on the court having requested that the court be polled on rehearing en banc (Federal Rule of Appellate Procedure 35; Local Fifth Circuit Rule 16), the petition for rehearing en banc filed by the plaintiffs-appellants is DENIED. The petitions for rehearing filed by the defendants-appellees are hereby GRANTED IN PART; our original opinion, reported at 632 F.2d 579 (5th Cir. 1980), is withdrawn and the following opinion is substituted in its place. In all other respects, the petitions for rehearing filed by the defendants-appellees are hereby DENIED.

This case involves the application of the Securities Act of 1933 (the 1933 Act) and the Securities Exchange Act of 1934 (the 1934 Act) to a series of transactions in which undivided interests in a parcel of undeveloped real estate were transferred to several joint ventures created for the purpose of holding the interests for a small number of purchasers, in exchange for promissory notes from the purchasers to the original owners of the property. This suit was brought by four of the purchasers,

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seeking to rescind the joint venture agreements, cancel the notes they had signed, and recover money already paid on the notes. The plaintiffs predicated their federal cause of action on the applicability of the 1933 Act and the 1934 Act, arguing that both the joint venture interests and the notes issued in payment for the real estate are securities within the meaning of the 1933 Act and the 1934 Act. The district court dismissed their claims for lack of subject matter jurisdiction and awarded $18,885.75 in costs to the defendants. We conclude that the plaintiffs' claims could not properly be dismissed for lack of subject matter jurisdiction; we therefore reverse the judgment of the district court and remand the case for further proceedings consistent with this opinion.

I. THE FACTS

From 1960 to 1969, Gordon G. Tucker, Fred E. Tucker, Jr. and Marvin M. Blakeney, Jr. each owned an undivided one-third interest in a 160 acre tract of land located between Dallas and Fort Worth (the Property). Gordon Tucker and Fred Tucker are brothers; Blakeney, now deceased and not a party to this suit, was married to their sister. After the location of the Dallas-Fort Worth airport was announced, each of the Tucker brothers and Blakeney, in a separate transaction, sold his undivided interest in the Property. The first sale occurred in November, 1969, when Blakeney sold his undivided one-third interest to Kenneth M. Good and Associates, Trustee (Good & Associates).

The second sale (and the first transaction directly involved in this suit) occurred in May, 1970, when Fred Tucker sold his undivided one-third interest to a group composed of M. L. Godwin, L. R. Polan, Jr. and James F. Mason, all of whom are employees of M. L. Godwin Investments, Inc. (Godwin Investments). Although the contract of sale required the group to execute a promissory note in the principal sum of $1,000,000 to Fred Tucker, it permitted the group thereafter to form a joint venture, and if such was accomplished, to substitute a new note executed by all the joint venturers in lieu of, and in rearrangement of, the first note. In July, 1970, the Grapevine-Regional Airport No. 1 Joint Venture (Reg Air I) was executed by John D. Williamson (one of the four plaintiffs in this action) and fifteen other investors (none of whom is a party to this action) for the purpose of purchasing the interest that Godwin, Polan and Mason had purchased from Fred Tucker. In December, 1970, this interest was conveyed to Reg Air I, and a promissory note in the principal amount of $1,000,000 was executed and delivered by Williamson and the other joint venturers to Fred Tucker in renewal and extension of the original note. Williamson purchased a 20% interest in the venture.

In December, 1970, Gordon Tucker (still the owner of a one-third undivided interest in the Property) and Good & Associates (which had purchased Blakeney's one-third interest in the Property) each sold a one-sixth undivided interest in the Property (a total one-third undivided interest) to Grapevine-Regional Airport No. 2 Joint Venture (Reg Air II), a joint venture formed for the purpose of acquiring that interest. In consideration of the transfer, the joint venturers executed and delivered long-term promissory notes to Gordon Tucker and Good & Associates in the aggregate principal amount of $1,332,333. Williamson purchased a 20% interest in Reg Air II; Harold R. Lilley purchased a 10% interest; Joseph C. Wilson and George Blake each purchased a 5% interest. Lilley, Wilson and Blake are the other three plaintiffs in this action.

In June, 1971, Gordon Tucker and Good & Associates again each sold a one-sixth undivided interest in the Property. This time the purchaser was Grapevine-Regional Airport No. 4 Joint Venture (Reg Air IV), and the purchase price was paid by the execution and delivery to Gordon Tucker and Good & Associates by the joint venturers of long-term promissory notes totalling $1,500,000 in principal amount. Williamson again purchased a 20% interest; Lilley purchased a 10% interest.

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As of June, 1971, therefore, each of three separate joint ventures owned an undivided one-third interest in the Property. The ownership of each joint venture was different; each had acquired its interest at a different time; and each had paid a different consideration. Nevertheless, the transactions were all arranged by Godwin Investments and are identical in all other relevant respects. Each of the purchases was financed by the execution and delivery of a fifteen year general liability promissory note, bearing interest at rates varying from 7% to 8 1/2 per annum, with interest only payable for the first eight years. The liability of the venturers on each note was several and not joint. Each of the notes was secured by a vendor's lien and deed of trust covering the undivided one-third interest in the Property purchased in exchange for such note. Each of the joint ventures had approximately fifteen venturers. In each case Godwin Investments (or Godwin, Polan and Mason, employees of Godwin Investments) signed a contract to purchase an interest in the Property and then attracted potential investors to participate in a joint venture through materials describing the investment potential of the proposed venture and the expertise of Godwin Investments, which was to manage the Property. 1

These materials emphasized the strategic location of the Property and included an analysis of real estate values in the areas surrounding the Los Angeles, San Francisco and Atlanta airports. The analysis stated, for example:

Although the comprehensive data listed herein would not be totally analagous to each given situation affecting the Dallas/Fort Worth Regional Airport, we do feel that the historical development of other major airport areas would indicate a similar potential use and value pattern applicable to the Regional Airport. Of course, an international airport of this immense size will undoubtedly have a tremendous effect on the values and development of nearby land, and its eventual economic contribution might be far greater than the public's ability to presently comprehend!

It was expected that the Property would be held by the joint venturers for a period of substantial appreciation in real estate values, after which it would be either be sold by the venturers or developed by them. Godwin Investments represented that it would ultimately pursue the sale or development of the Property and in the interim would perform all management duties, including efforts to have the land rezoned from single-family residential to its best uses. As the materials emphasized:

OUR FIRM AGGRESSIVELY PURSUES ALL ZONING AND PROPER LAND PLANNING EFFORTS TO ASSURE THE MAXIMUM PROFIT POTENTIAL OF EACH INVESTMENT.

Despite the representations of Godwin Investment's management duties and capabilities, the participants in each joint venture retained substantial control of the venture in the agreement which they signed. Each joint venture agreement requires unanimous consent of the venturers to confess a judgment; to make, execute or deliver any bond, mortgage, deed of trust, guarantee, indemnity bond, surety bond or accommodation paper or accommodation endorsement; to borrow money in the name of the joint venture or use joint venture property as collateral; and to amend the agreement to

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modify the rights of the venturers. In the event that any proposal for development is presented to the venturers, the vote of the holders of 60% or 70% in joint venture interests (depending upon the...

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