State v. Shama Resources Ltd. Partnership
| Decision Date | 26 July 1995 |
| Docket Number | No. 21137,21137 |
| Citation | 899 P.2d 977,127 Idaho 267 |
| Parties | , Blue Sky L. Rep. P 74,049, 64 USLW 2116 STATE of Idaho, Plaintiff-Respondent, v. SHAMA RESOURCES LIMITED PARTNERSHIP, an Idaho Limited Partnership; Lawrence W. McGary, Maranatha Management Corp., an Idaho corporation, Defendants-Appellants. Twin Falls, March 1995 Term |
| Court | Idaho Supreme Court |
Cantrill, Skinner, Sullivan & King, Boise, for defendants-appellants. David R. King argued.
Alan G. Lance, Atty. Gen., Mary E. Hughes, Deputy Atty. Gen., for plaintiff-respondent. Mary E. Hughes argued.
This is an appeal from a grant of summary judgment in favor of the State of Idaho, Department of Finance (the Department) against Lawrence W. McGary (McGary). The Department alleged that McGary violated the Idaho Securities Act by offering and selling unregistered securities through an unregistered broker-dealer and by engaging in fraudulent activities in the offer and sale of the securities. The Department sought injunctive relief, which was granted by the trial court.
Shama Resources Limited Partnership (Shama), located in Ketchum, Idaho, is an Idaho limited partnership involved in mining ventures. McGary and Maranatha Corporation (Maranatha) were general partners in Shama. Shama offered and sold securities in the form of limited partnership interests and promissory notes. The parties agree that the Shama limited partnership interests are securities within the definition of the Idaho Securities Act. I.C. § 30-1402(12). The securities offered and sold were unregistered, and the offerors, Shama and McGary, were not registered broker-dealers.
The Department filed a complaint against Shama, McGary, and Maranatha seeking injunctive relief enjoining these parties from offering and selling unregistered securities by an unregistered broker-dealer and from committing fraud in connection with the sale of securities in violation of the Securities Act. 1 In response, McGary asserted that the offerings and sales of the Shama securities were exempt from registration under the nonpublic offer and limited offer exemptions 2 and that no fraud was committed in the offering or selling of the limited partnership interests.
A default judgment was entered against Shama and Maranatha on January 25, 1991, and the case proceeded against McGary. The Department moved for summary judgment and filed affidavits on its behalf. McGary responded to the motion by filing a response and affidavits on his behalf. Before the trial court, the Department objected to the sufficiency of the McGary affidavits, pursuant to I.R.C.P. 56(e). The Department contended that the affidavits lacked sufficient foundation, that the statements contained in the affidavits would not be admissible at trial, that the affidavits presented information about which the affiants did not have personal knowledge, and that the statements in the affidavits were conclusory.
On January 24, 1994, the trial court rendered its decision granting summary judgment in favor of the Department and granting the permanent injunction against McGary. The injunction prohibited McGary from selling or offering for sale nonexempt, unregistered securities by an unregistered broker-dealer and from engaging in fraudulent activities while engaged in or in connection with the offer, sale, or purchase of any security. The trial court held that, pursuant to I.R.C.P. 56(e), the affidavits filed by McGary were insufficient in that they did not show that the exemption requirements were met with respect to each purchaser and offeree and were conclusory in nature. The trial court determined that the McGary affidavits were not based on personal knowledge, and were impermissibly based on hearsay. Additionally, the trial court determined that the affidavits lacked specific facts and foundation to support McGary's affirmative defenses. The trial court rejected the McGary affidavits and relied exclusively on the affidavits provided by the Department in granting summary judgment for the Department. Based on the affidavits and evidentiary material in the record properly before it, the trial court concluded that McGary failed to present evidence establishing that he qualified for the nonpublic offering or the limited offering exemption from registration under the Securities Act. The trial court also concluded that McGary omitted material facts in connection with the offer and sale of the securities in violation of I.C. § 30-1403. The sole issue on appeal is whether the trial court properly granted summary judgment in favor of the Department. We affirm the decision of the trial court.
This Court reviews the trial court's ruling on a motion for summary judgment by employing the same standard properly employed by the trial court when originally ruling on the motion. Farm Credit Bank of Spokane v. Stevenson, 125 Idaho 270, 272, 869 P.2d 1365, 1367 (1994). Summary judgment is proper "if the pleadings, depositions, admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." I.R.C.P. 56(c). The party moving for summary judgment bears the burden of establishing the absence of a genuine issue of material fact. Tingley v. Harrison, 125 Idaho 86, 89, 867 P.2d 960, 963 (1994); Harris v. Department of Health & Welfare, 123 Idaho 295, 298, 847 P.2d 1156, 1159 (1992). Once the moving party establishes the absence of a genuine issue, the burden shifts to the nonmoving party to make a showing of the existence of a genuine issue of material fact on the elements challenged by the moving party. Thomson v. Idaho Ins. Agency, Inc., 126 Idaho 527, 530-31, 887 P.2d 1034, 1037-38 (1994). I.R.C.P. 56(c) requires the entry of summary judgment against a nonmoving party who "fails to make a showing sufficient to establish the existence of an element essential to that party's case and in which that party will bear the burden of proof at trial." Olsen v. J.A. Freeman, 117 Idaho 706, 720-21, 791 P.2d 1285, 1299-1300 (1990) (citing Celotex v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986)). This Court, as well as the trial court in its initial ruling, is to liberally construe the record in favor of the party opposing the motion and draw all reasonable inferences and conclusions in that party's favor. Friel v. Boise City Hous. Auth., 126 Idaho 484, 485, 887 P.2d 29, 30 (1994). However, the threshold question before this Court is whether the trial court erred in its determination of the admissibility of the evidence presented in support of or in opposition to the summary judgment motion. See Hecla Mining Co. v. Star-Morning Mining Co., 122 Idaho 778, 784, 839 P.2d 1192, 1198 (1992).
During the arguments before the trial court, the Department challenged the sufficiency of the affidavits submitted by McGary, pursuant to I.R.C.P. 56(e). The Department claimed that the affidavits presented by McGary were insufficient. According to the Department, the claims made by McGary in his affidavits were conclusory and not within the knowledge of the affiants. The Department asserted that McGary made broad claims about all of the offerees and investors and did not make specific showings for each offeree or investor. The Department claimed that McGary failed to make a showing as to each element of his asserted exemptions, that the affidavits were not based on sufficient foundation, and that the statements contained in the affidavits would not be admissible at trial.
The trial court, in rendering its decision, rejected the affidavits presented by McGary on the grounds that the affidavits contained allegations of essential issues that were insufficient, conclusory, and based on hearsay. The trial court additionally found that the affidavits were not based on personal knowledge and did not set forth specific facts to support McGary's affirmative defenses, as required in I.R.C.P. 56(e).
I.R.C.P. 56(e) provides:
Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits. When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of that party's pleadings, but the party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the party does not so respond, summary judgment, if appropriate, shall be entered against the party.
The requirements of Rule 56(e) are not satisfied by an affidavit that is conclusory, based on hearsay, and not supported by personal knowledge. See Oats v. Nissan Motor Corp. in U.S.A., 126 Idaho 162, 166, 879 P.2d 1095, 1099 (1994); Ivey v. State, 123 Idaho 77, 80-81, 844 P.2d 706, 709-10 (1992). Only material contained in affidavits or depositions that is based upon personal knowledge or that is admissible at trial will be considered by this Court. Harris, 123 Idaho at 298, 847 P.2d at 1159.
The Department, in support of its summary judgment motion, presented affidavits and admissions to establish that McGary offered and sold unregistered securities through an unregistered broker-dealer and that McGary committed securities fraud. In response, McGary submitted affidavits and attached exhibits to establish the existence of...
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