JG Williams, Inc. v. Regency Properties, Ltd.

• Decision Date: 26 August 1987
• Docket Number: Civ. A. No. 87-161A.
• Citation: 672 F. Supp. 1436
• Parties: J.G. WILLIAMS, INC., Plaintiff, v. REGENCY PROPERTIES, LTD., Gwinnett Financial Services, Inc., Gwinnett Federal Savings & Loan Association, and Century 21 Regal Realty, Inc., Defendants.
• Court: U.S. District Court — Northern District of Georgia

672 F. Supp. 1436

J.G. WILLIAMS, INC., Plaintiff, v. REGENCY PROPERTIES, LTD., Gwinnett Financial Services, Inc., Gwinnett Federal Savings & Loan Association, and Century 21 Regal Realty, Inc., Defendants.

Civ. A. No. 87-161A.

United States District Court, N.D. Georgia, Atlanta Division.

August 26, 1987.

Jenkins, Bergman & Darroch, Atlanta, Ga., for plaintiff.

Swift Currie McGhee & Hiers, Atlanta, Ga., for defendants.

ORDER

ROBERT H. HALL, District Judge.

This is an action brought by plaintiff alleging (1) common law fraud, (2) violation of the federal Racketeer Influenced Corrupt Organizations Act (federal RICO), (3) violation of the Georgia Racketeer Influenced Corrupt Organizations Act (Georgia RICO), and (4) a state law claim for money had and received.

The case arose from a real estate transaction in which plaintiff, which is in the business of constructing single family homes, purchased from defendants, the owners and the realtor of the property, two lots of land in Gwinnett County, Georgia. The crux of the claims is plaintiff's allegation that defendants misled plaintiff into believing the two lots were suitable for single family housing when defendants knew that a highway or "spur" connecting Georgia Highway 400 and Interstate Highway 85 would traverse through the "Regency Lake" subdivision of which the two lots were a part.

Prior to filing an answer, defendants filed a motion to dismiss and/or motion for more definite statement challenging the sufficiency under Rule 9(b), Fed.R.Civ.P. of the allegations of fraud in Count One and the alleged violations of the RICO statutes in regard to Counts Two and Three. The motion for more definite statement under Rule 12(e), Fed.R.Civ.P. related to Count Four of the complaint.

This court in its order dated April 21, 1987 granted defendants' motion and required more specificity with regard to each count. The court dismissed the case subject to the right of plaintiff to amend the complaint to overcome pleading defects not later than May 8, 1987. The court observed that if the pleadings were still insufficient, defendants could renew their motion, or move to dismiss on new grounds.

Plaintiff filed an amended complaint on May 8, 1987. Defendants admit that plaintiff has corrected the errors in pleading counts one and four.¹ Currently before the court is defendants' Motion to Dismiss Counts Two and Three of the complaint, the federal and state RICO claims, for failure to state a claim upon which relief can be granted. Rule 12(b)(6), Fed.R.Civ.P. Plaintiff has also moved to extend discovery four months from the date of the court's ruling on the motion to dismiss.

FACTS

The facts plaintiff alleges form the basis for its claims are essentially set forth in paragraphs three through fifty-eight of the Amended Complaint. Plaintiff alleges that defendant Regency was the owner of the lots located in the Regency Lake Subdivision. Complaint ¶ 3. Plaintiff alleges that defendants Regency, Gwinnett Financial and Gwinnett Federal Savings & Loan were owners of the lots in question and became aware in March 1986 that the Georgia Department of Transportation ("D.O. T.") planned to build a roadway or "spur" between Georgia Highway 400 and Interstate Highway 85 that would proceed near or through this subdivision. Id. ¶ 4.

Plaintiff alleges that the president of Regency encouraged the Georgia D.O.T. to create a right-of-way through the subdivision. Plaintiff alleges also that Century 21, the alleged broker, and Gwinnett Federal, the alleged construction financier, also became aware of the highway construction plans. Id. ¶¶ 22-34; 51-57.

Plaintiff alleges that Gwinnett Federal improperly loaned money to Gwinnett Financial and that an employee of Gwinnett Federal acting on behalf of Gwinnett Financial called plaintiff's counsel to pressure counsel to prematurely release funds from an escrow account to Gwinnett Financial. Id. ¶¶ 53, 55.

Regency allegedly advertised the property in Atlanta area newspapers. Id. ¶ 8. These advertisements were allegedly placed by United States mail. Id. Plaintiff allegedly learned of the properties and negotiated for their purchase between April 1986 and July 1986. Id. ¶ 9.

Plaintiff allegedly identified himself as a builder of single family homes. Id. Plaintiff alleges that he learned from the president of defendant Regency that the lots were suitable for single family residential construction. Id. Plaintiff alleges that he received from Regency representatives informational materials including covenants and brochures relating to the subdivision. Id. ¶ 11.

In August 1986, plaintiff allegedly purchased the lots through Century 21. Id. ¶ 18. Plaintiff alleges it was unable to obtain construction financing for the two lots due to the plans for the "spur" and the right-of-way. Id. ¶ 19.

Plaintiff alleges the following "predicate acts" as forming a "pattern of racketeering activity":

8.

(a) In April 1986 Regency caused certain advertisements to run in Atlanta newspaper under the category of "subdivision lots for sale" for the Regency Lake Subdivision.

(b) Regency placed the ad in the newspaper by placing a phone call to the Atlanta newspaper.

(c) Regency knew when the ad was placed that the U.S. mails would be used for payment of this service.

(d) The Atlanta newspaper mailed to Regency, via the U.S. Postal Service, the charges for the ad(s).

(e) Regency mailed, via the U.S. Postal Service, its payment for this ad.

(f) The ad listed for sale property in the Regency Lakes Subdivision, including lots 7 and 8, as property suitable for residential development.

40.

(a) Defendants Gwinnett Financial Services and Regency Properties, Ltd. caused the documents entitled "Facts about Regency Lake" and the Regency Covenants to be distributed in person by Century 21 — Regal Realty at the subdivision and through the mails.

(b) These documents were mailed to prospective purchasers other than plaintiff and Jim Williams.

(c) These documents were mailed to plaintiff and Jim Williams.

50.

(a) On August 27, 1986, James Pack executed the Quit Claim Deeds attached hereto as Exhibits "D" and "E" and incorporated herein by reference as President of Gwinnett Federal Savings & Loan Association.

(b) Exhibits "D" and "E" were either received by James Pack or mailed by James Pack using the U.S. mail.

(c) All of James Pack's dealings with Exhibits "D" and "E" were in his capacity as President of Gwinnett Federal Savings & Loan Association.

53.

(a) Because of the relationship between Gwinnett Federal Savings & Loan and Gwinnett Financial Services, Inc., and because of James Pack's operation as president of each corporation, Gwinnett Federal Savings & Loan Association and Gwinnett Financial Services, Inc. are "affiliates" as described in Title 12 of the U.S. Code.

(b) Gwinnett Federal Savings & Loan Association loaned money to Gwinnett Financial Services, Inc. and/or Regency and took as security a "low quality asset" in the form of property that it knew could not be resold within the restrictive covenants imposed by Gwinnett Financial Services and Regency.

(c) Gwinnett Federal Savings & Loan Association failed to report this transaction to the Federal Home Loan Bank as required by law.

(d) In an effort to rid itself of this "low quality asset," Gwinnett Federal Savings & Loan Association failed to disclose the existence of the "spur" to Plaintiff and knowingly allowed Regency, Gwinnett Financial Services, Inc., James Pack and Richard Krebs to defraud Plaintiff.

54.

Gwinnett Federal Savings & Loan Association actively participated in this fraud by executing Quit Claim Deeds when it mailed to plaintiff's attorney or received from plaintiff's attorney through the mail.

74.

Said use of the United States Mails and interstate communications equipment in furtherance of the Defendants' scheme to defraud the Plaintiff constitute two or more acts of mail and/or wire fraud and thus serve as the "Predicate Acts" under the Federal and State RICO statute.

75.

The Defendants, in conjunction with Richard Krebs, James Pack, Kathy Perry, Susan Herd, and Judith McNeely, have engaged in a pattern of racketeering activity by:

(a) using the mails and telephone as set forth above to induce the Plaintiff to purchase property which the Defendants knew or reasonably should have known could not be used for the purpose of constructing residential homes as outlined in the restrictions placed on the property by the Defendants or with the Defendants' knowledge.

(b) using the mails and telephone as set forth above to induce the Plaintiff to purchase property which was improperly held as security by Gwinnett Federal Savings and Loan Association as collateral for a loan to Gwinnett Financial Services, Inc. and Regency, said collateral being a "low quality asset" as defined by law.

(c) using the mails and telephone as set forth above to induce the Plaintiff to purchase property as part of a scheme to cover up the existence of bank fraud under 18 U.S.C. 1344, by which the Defendants, in conjunction with Richard Krebs, James Pack, Kathy Perry, Susan Herd, and Judith McNeely, have allowed the investors, stockholders, and depositors of Gwinnett Federal Savings and Loan Association to hold real estate as a security which could not be sold or otherwise used for the purposes to which it was restricted under Exhibit "B".

The following constitutes plaintiff's allegation of "enterprise":

76.

The Defendants, in conjunction with Richard Krebs, James Pack, Kathy Perry, Susan Herd, and Judith McNeely, have formed an enterprise for the mutual financial benefit derived from the pattern of racketeering activity by means of:

(a) The documents attached hereto as Exhibits "A" through "E" and referred to above,

(b) The exclusive agreement that allows Century 21, Susan Herd, and Judith McNeely to list and sell lots 7 and 8,

(c) The joint ownership of the property by Gwinnett Financial Services and Regency,

(d) The overlapping

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