Stowell v. Ted S. Finkel Inv. Serv., Inc.
| Decision Date | 31 March 1980 |
| Docket Number | No. 77-6497-Civ-JLK.,77-6497-Civ-JLK. |
| Citation | 489 F. Supp. 1209 |
| Parties | Aubrey L. STOWELL, Ronald Marcus, Marion T. Martin, Terry Beye and James Escarre, Plaintiffs, v. TED S. FINKEL INVESTMENT SERVICES, INC., a Florida Corporation, Ted S. Finkel, Individually, Stanley H. Beck, Jade Coal Company, Ltd., a Florida Limited Partnership, Sanford Kaplan and Georgia National Coal Company, a Florida Corporation, Defendants. Stanley H. BECK, Third-Party Plaintiff, v. James S. MOFSKY, Third-Party Defendant. |
| Court | U.S. District Court — Southern District of Florida |
COPYRIGHT MATERIAL OMITTED
John I. Van Voris, Shackelford, Farrior, Stallings & Evans, P. A., Tampa, Fla., for plaintiffs.
Michael Olin, Podhurst, Orseck & Parks, Miami, Fla., for defendants Ted S. Finkel, Ted S. Finkel Investment Services, Inc., and Jade Coal Co., Ltd.
Stanley H. Beck, pro se.
Paul R. Larkin, Blackwell, Walker, Gray, Powers, Flick & Hoehl, Miami, Fla., for third-party defendant.
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT AND DISMISSING PENDENT CLAIM
This matter arose upon cross motions for summary judgment. The amended complaint alleges various violations of both federal and state securities laws and common law fraud in the purchase by the plaintiffs of limited partnership interests in Jade Coal Co., Ltd. Counts I and IV allege that the defendants failed to disclose material facts in violation of Rule 10b-5 and Section 10(b) of the Securities and Exchange Act of 1934, Sections 12(2) and 17 of the Securities Act of 1933, and Section 517.301 of Florida Statutes. Counts II and V allege that the defendants failed to register the limited partnership units as securities in violation of Sections 12(1) and 12(5) of the Securities Act of 1933 and Section 517.07 of Florida Statutes. Count III alleges common law fraud.
Plaintiffs Aubrey Stowell, Ronald Marcus, Marion T. Martin, Terry Beye and James Escarre filed motions for partial summary judgment against defendants Ted S. Finkel and Jade Coal Company on Counts II and V. Finkel, Jade and Finkel Investment Services, Inc. filed a cross motion for summary final judgment on all counts.
Summary judgment should be granted if the pleadings, depositions and affidavits filed in the case show that there are no genuine issues of material fact, and that one of the parties is entitled to a judgment as a matter of law. Rule 56(c) F.R.Civ.P. On the cross motions now before this court, the material facts of one of the issues raised in Counts II and V, the issue of whether the limited partnership units of Jade Coal Co., Ltd. are securities for purposes of either state or federal law, are undisputed. This issue can properly be resolved as a matter of law by the court on summary judgment. Cf. Great Western Bank & Trust v. Kotz, 532 F.2d 1252 (9th Cir. 1976). Issues of fact remain to be resolved in the issues raised in Counts I and IV and other issues raised in Counts II and V. Hence, the Court grants partial summary judgment on the plaintiffs' and defendants' motions on Counts II and V, and denies the defendants' motion on all other counts. Count III alleging common law fraud is dismissed without prejudice to the plaintiffs. The Court enters the following order accordingly.
This action arose from the plaintiff's purchase of units of Jade Coal Company, a limited partnership. These interests were marketed as coal mining sublease tax shelter programs whereby the investors purchased interests in a limited partnership which subleased coal mining property. The limited partnership then paid advance royalties and agreed to sell a percentage of specified coal reserves and right to mine to another company. Jade was one of eight limited partnerships syndicated by Defendants.
In the spring and early summer of 1976, defendant Georgia National Coal Company, a corporation wholly owned by defendant Sanford Kaplan, entered into a ten year lease of approximately 1000 acres of property in Bell County, Kentucky. In June, 1976, offering circulars were prepared for two limited partnerships: Amber Coal Co., Ltd. and Blue Coal Co., Ltd. According to the circulars, both limited partnerships were to sublease property from National and engage, or contract another to engage, in mining operations on the property. It appears from the record that defendant, Stanley Beck, prepared the tax opinions, leases, subleases and corporate documents and that Finkel, or his agents, prepared the remaining portions of the offering circulars. Finkel chartered Finkel Investment Service, a Florida corporation, to serve as the general partner in the Amber and Blue limited partnerships. Within a matter of weeks all limited partnership units in Amber and Blue were purchased and the partnerships were chartered.
A few months later, offering circulars were prepared for two additional limited partnerships: Diamond Coal Co., Ltd. and Emerald Coal Co., Ltd. The circulars proposed that these limited partnerships sublease the remaining property leased by National. Within a few weeks, the units were purchased and the partnerships chartered.
In the Fall of 1976, Kaplan, Finkel and Beck negotiated the purchase of a tract of land adjacent to the property leased by National in Bell County, Kentucky. Kaplan purchased the land and immediately leased it to Georgia National. Offering circulars for four additional limited partnerships were issued shortly thereafter. These partnerships were Crystal Coal Co., Ltd., Indigo Coal Co., Ltd., Jade Coal Co., Ltd., and Silver Coal Co., Ltd. Each circular provided that the respective limited partnership would sublease a tract of property from National when the partnership was fully subscribed and chartered. Finkel served as the individual general partner in all four partnerships.
Over a period of approximately one year, Kaplan, National, Beck, Finkel and Finkel Investment Services syndicated or participated in the syndication of eight limited partnerships. The offering circulars for each were essentially identical, with only slight variations in the number of units, price per unit, amount of royalties to be paid National, and the amount of other fees. Chart I summarizes the limited partnership syndications.
CHART I
SUMMARY OF LIMITED PARTNERSHIPS
LIMITED LOCATION GENERAL DATE OF NO. OF NO. OF PRICE AGGREGATE DATE
PARTNERSHIPS OF PROPERTY PARTNER OFFERING INVESTORS PARTNERSHIP PER CASH PARTNERSHIP
CIRCULAR UNITS UNIT SALES PRICE CHARTERED
OF UNITS
--------------------------------------------------------------------------------------------------------------------------------
Amber Bell County FIS 6/30/76 15 15 $14,000.00 $210,000 7/27/76
Blue Bell County FIS 6/30/76 19 15 $14,000.00 $210,000 7/27/76
Diamond Bell County FIS 6/31/76 21 16 $14,000.00 $224,000 10/27/76
Emerald Bell County FIS 8/31/76 19 16 $14,000.00 $224,000 10/27/76
Crystal Knox County Finkel 11/07/76 19 16½ $14,500.00 $239,250 11/29/76
Indigo Knox County Finkel 11/07/76 14 16½ $14,500.00 $239,250 11/29/76
Jade Knox County Finkel 11/07/76 9 16½ $14,500.00 $239,250 12/17/76
Silver Knox County Finkel 12/07/76 11 8½ $14,500.00 $125,250 12/20/76
________________________________________________________________________________________________________________________________
TOTALS ............................................... 127 $1,696,500
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Jade Coal Co., Ltd.
At the time of the purchases of interests in Jade Coal Co., Ltd., all the plaintiffs were either directors or officers of Marcus, Stowell & Beye, Inc., Marcus, Stowell & Beye Securities, Inc., and Marcus, Stowell & Beye Government Securities, Inc. Marcus, Stowell & Beye Government Securities, Inc. is a broker-dealer registered with both the Securities and Exchange Commission and the National Association of Securities Dealers. Plaintiffs hired Tony Biancarosa, a certified public accountant and one of their employees, to seek out an investment for the plaintiffs. It appears from the record that the plaintiffs wanted an investment that offered immediate tax deductions in order to shelter current income. Biancarosa contacted Beck who referred him to Finkel who supplied him with a Jade Coal Co., Ltd. offering circular. The circular contained: a confidential memorandum, a tax opinion, a proposed coal sublease agreement, a coal mining report on the property to be subleased by the partnership, the limited partnership agreement, and a subscription and escrow agreement.
After extensive review of the Jade circular, Biancarosa recommended the Jade investment to the plaintiffs. On December 10, 1976, a check for $20,300.00, ten percent of the purchase price of all the units to be purchased by the plaintiffs, was delivered to Finkel as a down payment for 14 of the 16½ units offered for sale. The plaintiffs' purchases are summarized in Chart II. Five days later Finkel received a check for $182,700.00,...
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