Kleiner v. Silver
| Decision Date | 11 February 1976 |
| Docket Number | No. 51750,No. 3,51750,3 |
| Parties | , Blue Sky L. Rep. P 71,277 Jack KLEINER et al. v. Arthur SILVER et al |
| Court | Georgia Court of Appeals |
Katz, Tye & Weissman, Jack Kleiner, Donald A. Weissman, Atlanta, for appellants.
Redfern, Butler & Morgan, James E. Massey, Atlanta, for appellees.
Arthur Silver and William Silver in May, 1973 executed a limited partnership agreement with Jack Kleiner, Chicago Land Associates and others as general partners pursuant to the Uniform Limited Partnership Act (Code Ann. Ch. 75-4). Subsequently they sought to obtain a declaratory judgment that their limited partnership interests were securities within the meaning of section 102(i) of the Georgia Securities Act of 1957 (Code Ann. § 97-102(i)) and that the amount tendered them by Kleiner and the other appellants to take back the securities was not for the 'full amount paid' within the meaning of Section 114(b) (Code Ann. § 97-114(b)). The appeal is from the grant of a partial summary judgment in favor of the Silvers.
1. Where the limited partners look solely to the general partner for the enhancement of their investment and the ultimate success of the venture, and the investors' return is essentially dependent upon the efforts of the syndicator or affiliate, such investment contract will be deemed a security under the Securities Act of 1957. 1 Fortier v. Ramsey, 136 Ga.App. 203, 206, 220 S.E.2d 753.
Section XI of this limited partnership agreement provides that the general partners shall be the managing partners of the partnership, 'exercise all administrative power within the partnership,' and be 'the sole representatives of the partnership in all transactions with third parties.' The section also recites that the general managers shall have the sole right to convey partnership property and execute papers on behalf of the partnership and that all accounting books and income tax records shall be kept by the general partners. It further provides that 'No limited partner as such shall have any right or power to take part in the control of the partnership business . . .'
At the time did the limited partners here agreed to assist the general partners in the management of the venture. Notwithstanding appellants' assertion that in autumn of 1974 the Silvers 'caused the discharge' of the partnership accountant and management agent and had them replaced with other men, it does not follow that the nature of the investment scheme was thereby changed. There were no allegations that the general partners were opposed to the hiring of the new men or had ceased to control the partnership. There was nothing to show that the limited partners did not look solely to the general partners for the enhancement of their investments and the ultimate success of the venture. Therefore their interests were securities within the contemplation of the Georgia Securities Act of 1957.
2. Attached to the motion for summary judgment was a certificate of the Secretary of State of Georgia showing that a diligent search had been made of the records on file in his office and no evidence had been found that a registration for the public sale of securities or exemption from registration under the Securities Act (Code Ann. § 97-104) had ever been granted to Chicago Land Associates. This constituted prima facie evidence of non-compliance with the Act and shifted the burden to the appellants to show that the securities were exempt from registration under some other provision. Code Ann. § 97-115; Allen v. Smith & Medford, Inc., 129 Ga.App. 538, 199 S.E.2d 876.
Appellants' argument that the purchase of the Silvers' securities were isolated transactions within the meaning of Code Ann. § 97-107(c) is without merit because Chicago Land Associates was the issuer of the limited partnership units sold to the Silvers. Utzman v. Caribbean & Southeastern Divelopment Corp., 107 Ga.App. 56, 129 S.E.2d 62. Accordingly, there being no question of fact that the securities were neither registered nor exempt nor sold in an exempt transaction as required by Code Ann. § 97-104, the transactions were in violation of the Georgia Securities Act of 1957 and...
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