759 N.E.2d 789 | Ohio Ct. App. | 2001
This is a securities investment case brought under the Ohio Securities Act, R.C.
Hammond described the investment process in his deposition. Rogers would contact Hammond and tell him he needed a certain sum of money, i.e. offering an investment opportunity in Sunbelt at a set capital investment, such as $100,000 on one occasion. Rogers would only accept an investment at a specified amount, and then only from Hammond — he did not want to deal with other investors. Hammond would then contact his acquaintances to determine if they wanted to invest with Rogers and Sunbelt. He told them to make their checks payable to him and that he would forward the money to Rogers and Sunbelt.
Terry Boland, Doug Young, and Lou Thompson, the plaintiffs-appellees in this case, learned of the investment opportunities with Rogers and Sunbelt through Greg Collier (Collier), Hammond's nephew. Collier and the plaintiffs-appellees were all co-workers at Martin Marietta. All three plaintiffs-appellees invested in Sunbelt through Collier, who forwarded the money to Hammond. Hammond would wire the money to Rogers in Louisiana. In return, Rogers would send all of the Sunbelt promissory notes and documents, as well as any payment of interest or principle on the investments, to Hammond who would then distribute them to investors, including the plaintiffs-appellees.
On one occasion, Hammond arranged for a meeting between Rogers and the plaintiffs-appellees at the Shoney's Restaurant in Portsmouth, Ohio. At the meeting, Rogers proposed buying an interest in Cedar Hill Game Call Company (Cedar Hill), a Louisiana corporation that sold hunting paraphernalia. All three of the plaintiffs-appellees made additional investments with Rogers and Sunbelt following the meeting.
Rogers and Sunbelt eventually defaulted on the promissory notes and agreements. Each of the plaintiffs-appellees lost at least a portion of their investment. They initiated their complaint in the Scioto County Court of Common Pleas against Rogers, his wife, Kimberly Rogers, Hammond, and Sunbelt. They later amended their complaint to add Greg Collier. Rogers, Kimberly Rogers, and Sunbelt refused service of the amended complaint, and as a result, plaintiffs-appellees were granted default judgment against them. Greg Collier was later released from the suit after filing bankruptcy. This left Hammond who moved for summary judgment. Plaintiffs-appellees responded by filing their own motion for partial summary judgment against Hammond. The trial court denied Hammond's motion, but granted plaintiffs-appellees' motion and entered summary judgment in their favor. All other causes of action against Hammond were *92 dismissed. On May 17, 2000, the trial court awarded specified damages based on the summary judgment order. Hammond filed a timely notice of appeal and assigns the following errors for our review:
• FOR PLAINTIFF TO BE SUCCESSFUL IN PROVING MONETARY DAMAGES OWED BY DEFENDANT TO PLAINTIFF FOR ALLEGED VIOLATION OF SECURITIES LAWS AND MISREPRESENTATION, SAID PLAINTIFFS MUST PROVE THAT THE ALLEGED VIOLATION MATERIALLY AFFECTED THE CONTEMPLATED PROTECTION THAT THE ALLEGED VIOLATION OF REVISED CODE CHAPTER 1707 PROVIDES PROTECTION FOR AND IN THE CIRCUMSTANCES HEREIN THE VIOLATION DID NOT AFFECT THE PROTECTION THAT WOULD HAVE BEEN AFFORDED HAD SAID SECURITIES REGULATION APPLIED AND THEREFORE THE PURCHASER HAS NO REMEDY AGAINST DEFENDANT DONALD HAMMOND FOR HIS FORWARDING THE MONIES OF PLAINTIFFS TO THE SELLER IN THE SECURITIES BEING SUNBELT AND WENDELL ROGERS.
• WHERE ONE WHO HAS INVESTED IN A CORPORATION OR IN SECURITIES IS CONTACTED BY ANOTHER POTENTIAL INVESTOR, HE HAS NO DUTY TO VOLUNTEER INFORMATION. SUCH FIRST INVESTOR CANNOT BE HELD LIABLE FOR THE LOSSES OF OTHER INVESTORS WHERE THERE IS NO EVIDENCE THAT HE WAS A PARTY TO THE PLAN TO SOLICIT NEW INVESTORS. THEREFORE SAID PLAINTIFF IS NOT LIABLE TO DEFENDANTS.
DEFENDANT WAS NOT AN AGENT FOR THE OWNER AND SELLER OF THE SECURITIES BUT WAS AN INVESTOR OF IN [SIC] THE SECURITIES AND MERELY FORWARDED PLAINTIFFS' MONEY TO THE SELLERS OF THE SECURITIES AND THEREFORE WAS THE AGENT OF THE PLAINTIFFS. DEFENDANT DID NOT PARTICIPATE IN THE SALE OF THE SECURITIES ON BEHALF OF THE OWNER AND SELLER OF THE SECURITIES AND THEREFORE DID NOT VIOLATE ORC CHAPTER 1707. DEFENDANT WAS A MERE INVESTOR THE SAME AS PLAINTIFFS.
While these "statements" are lengthy and do not technically comply with App.R. 16(A)(3), we proceed to address the two specific issues that can be distilled from the appeal. First, Hammond argues that his particular involvement in the investment transactions was insufficient to make him liable to plaintiffs-appellees under R.C.
We review a trial court's decision to grant summary judgment on a denovo basis. Grafton v. Ohio Edison Co. (1996),
The party moving for summary judgment has the initial burden of informing the trial court of the basis of the motion, and identifying those portions of the record that demonstrate the absence of a material fact. Dresher v. Burt (1996),
If the moving party satisfies its burden, then the burden shifts to the non-moving party to offer specific facts showing a genuine issue for trial. Civ.R. 56(E); Dresher, supra. The non-moving party must come forward with documentary evidence rather than resting on unsupported allegations in the pleadings. Kascak v. Diemer (1996),
The trial court granted summary judgment on appellees' fifth cause of action brought under R.C.
Every sale or contract for sale made in violation of Chapter 1707. of the Revised Code, is voidable at the election of the purchaser. The person making such sale or contract for sale, and every person who hasparticipated in or aided the seller in any way in making such sale or contract for sale, are jointly and severally liable to such purchaser, in an action at law in any court of competent jurisdiction, upon tender to the seller in person or in open court of the securities sold or of the contract made, for the full amount paid by such purchaser and for all taxable court costs, unless the court determines that the violation didnot materially affect the protection contemplated by the violatedprovision. (Emphasis Supplied).
The appellees met their burden under Dresher with affidavits of both parties as well as documents from the Ohio Department of Commerce. This evidence showed that the promissory notes and agreements were "securities" as defined in R.C.
Hammond did not present any evidence to contradict that a "sale" of "securities" had taken place, or that the securities were neither registered nor exempt from registration in violation of R.C.
There are no factual issues in this case concerning what role Hammond played in the sales transactions between appellees and Rogers and Sunbelt. The appellees relied heavily on Hammond's own affidavit in their motion for summary judgment. The issue presented is whether those actions, as a matter or law, constituted "participation in or aiding" in the sale of unregistered securities in violation of R.C.
Under R.C.
The uncontroverted evidence in this case establishes that Hammond relayed the proposed terms of the sales from Rogers to investors, including appellees, and that he arranged and attended meetings between appellees and Rogers. In addition, Hammond collected the money for the investments, distributed the promissory notes and other documents from Rogers and Sunbelt, and distributed principle and interest payments. Although he did not have any direct contact with appellees, Hammond was heavily involved in the actual sales transactions between Roger and Sunbelt and the appellees. By his own admission, the investment opportunities in Sunbelt would never have been presented to appellees if not for the fact that he disseminated the information or "spread the word" about the opportunities. More importantly, he was the only avenue for investment. Rogers insisted on dealing only with Hammond, not other investors. This evidence shows that Hammond was much more involved than just bringing *95 Rogers together with investors. He in fact participated in and aided Rogers and Sunbelt in the sales of the securities to appellees.
Furthermore, Hammond stood to gain financially if investments were ultimately made in Sunbelt. In his deposition, Hammond indicated that he and Rogers purchased real estate in Scioto County, Ohio with the intent to develop the property into a game reserve and then lease it or sell it to Cedar Hill if Cedar Hill "became a company." Thus, he had a stake in raising the capital for Sunbelt to invest in Cedar Hill. See, generally,Callahan v. Class One, Inc. (Dec. 22, 1989), Montgomery App. No. 11550, unreported, reversed on other grounds (1991),
Given his extensive involvement in the sales transactions and his financial stake in obtaining investors for Rogers and Sunbelt, we find that a reasonable person could only conclude that Hammond "participated in or aided" Rogers and Sunbelt in the sale of securities to the appellees, and that he is not excluded from liability for his participation under R.C.
Next, Hammond argues that failure to register the securities in violation of R.C.
Construing the evidence in a light most favorable to Hammond, the non-moving party, we find that reasonable minds can come to one conclusion, which is that Hammond is liable to plaintiffs-appellees under R.C.
JUDGMENT AFFIRMED
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Scioto County Common Pleas Court to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of the date of this entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.
Kline, J. Evans, J.: Concur in Judgment and Opinion
_______________________ William H. Harsha, Judge
