Fortier v. Ramsey, 51110

• Decision Date: 20 October 1975
• Docket Number: No. 2,No. 51110,51110,2
• Citation: 220 S.E.2d 753,136 Ga.App. 203
• Parties: , Blue Sky L. Rep. P 71,265 E. L. FORTIER et al. v. A. C. RAMSEY et al
• Court: Georgia Court of Appeals

Page 753

220 S.E.2d 753

136 Ga.App. 203, Blue Sky L. Rep. P 71,265

E. L. FORTIER et al. v. A. C. RAMSEY et al.

No. 51110.

Court of Appeals of Georgia, Division No. 2.

Oct. 20, 1975.

Walter W. Calhoun, Atlanta, for appellants.

Holcomb & McDuff, Frank D. Holcomb, Marietta, for appellees.

CLARK, Judge.

Plaintiffs, husband and wife, brought suit against defendants, A. C. Ramsey and Mutual Service Corporation, alleging violations of the Georgia Securities Act of 1957 (Ga.L.1957, p. 134 et seq.). ¹ In their complaint, plaintiffs asserted that on three separate occasions defendants sold plaintiffs interests as limited partners in three land syndication ventures; that these 'securities' were not registered as required by the Georgia Securities Act of 1957; that, pursuant to Section 13 of the Act (Ga.L.1957, pp. 134, 161), plaintiffs elected to void these transactions and tender the 'certificates' to defendants; and that, therefore, defendants are jointly and severally liable to plaintiffs 'in the amount of $69,102.29, with interest at 5% per annum from dates of payments to defendants, plus reasonable attorney's fees of $20,000 and court costs.' Defendants answered, admitting jurisdiction, but denying the material allegations of the complaint.

Following discovery plaintiffs moved for summary judgment. In opposition to plaintiffs' motion, defendants interposed a 'Response to Plaintiffs' Motion for Summary Judgment.' Therein defendants argued plaintiffs could not recover for the sales of interests with regard to two of the three limited partnership ventures because those transactions occurred more than two years before plaintiffs' action was commenced. ²

In denying the motion by plaintiffs the trial judge wrote in part as follows: 'The complaint is based on three separate and distinct transactions . . . The motion for summary judgment is leveled generally at the aggregate sum of the sales . . . Sub judice there are sales or contracts dated May, 1972 and June, 1972. (The third contract was executed in December, 1972.) The suit was brought in July, 1974. Clearly as to any sale or contract consummated prior to July, 1972, the statute of limitations bars a claim. Therefore, the movant is not entitled to summary judgment as he has directed his motion to the entire complaint and there are two sales or contracts which are barred by the statute of limitations.'

From this adverse ruling plaintiffs appeal with a certificate of immediate review. Held:

1. 'What Is a Security?' is the title of the first article in the Spring 1974 issue of the Mercer Law Review which was devoted entirely to the important subject of 'Securities Regulation.' That lead article states: 'Although a major state law regulating securities was enacted in 1911, and the major federal securities law was enacted in 1933, important judicial decisions as to what is a security were still being rendered in 1973. This long range persistency of the definitional problem indicates that the concept of what constitutes a security has been, and is, a changing concept, so far as its practical application is concerned.' Sobieski, What is a Security? 25 Mer.L.Rev. 381 (1974).

Do limited partnership interests in land syndication ventures with control vested in the general partners constitute securities? ³

The Georgia Securities Act of 1957 defined 'Security' as 'any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of indebtedness, investment certificate, certificate of interest or participation, certificate of interest in oil, gas or other mineral rights, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate or beneficial interest in title to property, profits or earnings, or any other instrument commonly known as a security . . .' Ga.L.1957, pp. 134, 136. (Emphasis Supplied).

In SEC v. W. J. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244, 163 A.L.R. 1043, the United States Supreme Court ruled that in determining whether a contract for the sale of an interest is an 'investment contract' under the Federal Securities Act of 1933, one must decide 'Whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others; . . .' In Ga. Market Centers, Inc. v. Fortson, 225 Ga. 854, 858, 171 S.E.2d 620, 623, our Supreme Court approved this test, finding it to be 'a workable formula to use in testing whether a contract of the type under consideration here is subject to regulation by the Commissioner of Securities of Georgia.' See also 1974, Ops.Atty.Gen., pp. 145, 146, wherein it is written, 'Unquestionably, a sale of an interest in real estate is not, of itself, a sale of a security. The courts have long recognized, however, that a transaction which purports only to be a sale of real estate can, when the economic realities of the transaction are examined, be determined to be a security. (Cits.). The rule which has developed is that any investment will be deemed an investment contract and a security if the investor's return is essentially dependent upon the efforts of the syndicator or an affiliate. (Cit.).'

Since the Georgia Securities Act is remedial in nature, it is to be construed broadly to effectuate its aim-the protection of investors. Jaciewicki v. Gordarl Associates Inc., 132 Ga.App. 888, 893, 209 S.E.2d 693, citing SEC v. Koscot Interplanetary, Inc., 497 F.2d 473 (5th Cir., 1974). Liberally applying our securities law to the case at bar, we conclude that the limited partnership interests sold by defendants were undoubtedly securities inasmuch as defendant Ramsey conceded, via deposition, that the limited partners looked solely to him as general partner for the enhancement of their investments and the ultimate success of the ventures.

2. 'The purpose of the...