Opposition — Paquin v. Cronk

.

Supreme Court of the United States

OCTOBER TERM, 1975

No. 75-1135

CLAUDE Y. PAQUIN, et ux.,

Petitioners,

versus

FOUR SEASONS OF TENN., INC.., et al;

NORMAN H. CRONK,

Respondent.

BRIEF FOR RESPONDENT NORMAN H. CRONK IN OP-

POSITION TO PETITION FOR WRIT OF CERTIORARI

FLOYD E. SIEFFERMAN, JR.

Counsel for Respondent

Norman H. Cronk

OF COUNSEL:

CHAMBERS, SIEFFERMAN,

ROBINSON & COOPER

Suite 464

2200 Century Parkway, N.E.

Atlanta, Georgia 30345

(404) 325-9970

SCOFIELDS’ QUALITY PRINTERS. P O BOX 53096.N O LA 70153 504/822-1611

TABLE OF CONTENTS

Page

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Argument:

I. Alleged “‘Departure from Usual

Course of Judicial Proceedings” ........... 7

II. No Conflict of Decisions ................... 9

III. The Supposed Undecided Question of

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TABLE OF AUTHORITIES

Affiliated Ute Citizens of Utah vs. United

, Sr SD oi ccccccccentdeueiwres i)

Foremost-McKesson, Inc. vs. Provident

Securities Company, 423 U.S. —__, 46

5 RRS Ie Se Rene hy Same pure 10

Interstate Land Sales Full Disclosure Act, 82

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15 U.S.C.A. §§1701-1720 ... 0... cece cc ccccuccecucens 3

24 C.F.R. §1710.105 (1973) 2.0... cece cece ee ceeeeees 2

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1975

No. 75-1135

CLAUDE Y. PAQUIN, et ux.,

Petitioners,

versus

FOUR SEASONS OF TENN., INC., et al;

NORMAN H. CRONK,

Respondent.

BRIEF FOR RESPONDENT NORMAN H. CRONK

IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

OPINIONS BELOW

The opinions below are set out in full in the appen-

dices to Petitioners’ Brief, and the opinion of the U.S.

Court of Appeals forthe Fifth Circuit is reported at 519

F.2d 1105 and that court’s opinion on motion for

rehearing at 522 F.2d 1270.

JURISDICTION

The Petition for Certiorari (pp. 2 and 3) adequately

sets forth the jurisdictional requisites.

2

QUESTIONS PRESENTED

Petitioners’ statement of “Questions Presented for

Review” are not at all in accord with the record in this

case. The record would support the following

“questions”:

(1) Ina suit against a land owner and an employee

of the developer involving a land purchase trans-

action occurring some years prior to the December

1973 amendments to 24 C.F.R. §1710.105 [Part II(c)(2)]

would the failure of the developer corporation to

amend its theretofore printed Property Report to

reflect the fact of the filing six weeks prior to the trans-

action of a Reorganization Proceeding by the

developer corporation’s separate corporate parent,

but the Property Report stating, many times:

“Completion is dependent upon the satisfactory sale

of lots ... and the developer's ability to secure ade-

quate financing”, and there being no prejudice result-

ing from such Reorganization Proceeding (because

the developer corporation was promptly purchased by

outside interests), constitute a per se and irrebutable

violation of the Interstate Land Sales Full Disclosure

Act of 1968 thereby causing absolute liability to fall

upon one of the developer's “sales” force having no

knowledge of the Reorganization Proceeding but in-

volved to some degree in the sale transaction?

(2) May the damages recoverable under the In-

terstate Land Sales Full Disclosure Act include pre-

judgment interest on the damages suffered by plain-

tiffs as revealed by the evidence?

3

(3) Whether the Findings of Fact, Conclusions of

Law and Judgment of the District Court were clearly

erroneous in finding: That the “Statement of Record”

and “Property Report” met the requirements of law

and that appellants’ evidence failed to show any mis-

representation or omission of material fact therein,

and, thus, appellants failed to meet their burden of

proof? [The trial court in its order of August 16, 1974

correctly observed that: “The issues raised in this

appeal primarily present questions as to the sufficien-

cy of the evidence.’’]

STATUTE INVOLVED

Petitioners have correctly stated that the case in-

volves “The Interstate Land Sales Full Disclosure

Act”, P.L. 90-448 (15 U.S.C.A. §§1701-1720), but they

have omitted material portions thereof from their

petition. Reference should be had to the entire Actas it

was in July, 1970 (prior to the October and December,

1970 and the August, 1974 amendments, but after the

December, 1969 amendment).

STATEMENT OF THE CASE

Petitioners here, plaintiffs below, on July 12, 1970,

contracted to purchase from Four Seasons of

Tennessee, Inc. a single lot in a real estate develop-

ment located in Coweta County, Georgia known as

“Four Seasons of Georgia’. Before the contract of

purchase was signed by Petitioners, they (both hus-

band and wife) had carefully inspected the develop-

ment in person on a personal “guided tour’, driven (in

his personal automobile) by Respondent Norman H.

Cronk, a part time (Sunday afternoons) employee of

4

the developer (Diversified Land Developers, Inc.). At

that time Petitioner Claude Paquin was a graduate ac-

tuary of some distinction, and a law student. Respon-

dent Cronk was a retired Lt. Col. fromthe U.S. Army.

Respondent Cronk steadfastly maintained that he

was nothing more than a guide (termed a “lineman’’)

around the property. Petitioners, on the other hand,

maintained that he played some part in the pricing of

the lot (by telling the petitioners that they could obtain

the lot for less than the printed list price — thus acting

in favor of the petitioners) and by handing to

Petitioners some of the papers concerning the actual

sale thereby became a “salesman” agent of the

developer. It is undisputed that Respondent Cronk

signed no papers, contracts, deeds or the like. All con-

tractual obligations were directly between Four

Seasons of Tennessee, Inc., their sales personnel (as

distinguished from “linemen” such as Cronk) and

Petitioners — Respondent Cronk was in no way in-

volved.

It was not until six (6) weeks after the signing of the

contract [and after the developer, “Diversified Land

Developers, Inc.” became totally disassociated from

the then reorganizing “Whale, Inc.”] that the

Petitioners paid the balance of the purchase price.

Even then they did not pay tothe attorney handling the

matter the deed recording costs and thus there was a

delay (until after Petitioners did pay those charges) in

recording their Warranty Deed. Petitioners’ record-

ing fee check did not clear the bank until November,

1970. Prior to the time Petitioners paid the vast majori-

ty of the purchase price they had been put on actual

notice, by letter, of the Chapter X proceedings as to

“Whale, Inc.”, and the later disassociation of the

Developer from “Whale, inc.” — yet they still paid.

Waiver?

The Petitioners’ statement of facts becomes in-

volved with the Chapter X (and eventual bankruptcy)

proceedings against a corporation known as “Whale,

Inc.”. That corporation was neither the owner nor the

developer of the subject property known as Four

Seasons of Georgia. Though Whale, Inc. did go

through Chapter X and (much after the facts here)

bankruptcy proceedings, and regardless of the

prayers of its bankruptcy petition, neither the proper-

ty owner nor the developer here involved did. Thus the

bankruptcy of Whale, Inc. has no legal bearing on

these proceedings whatsoever. There certainly was no

legal requirement (either by statute or regulation in

force at that time) that Whale, Inc. (or any parent or

subsidiary corporation be brought into the Property

Report.

Petitioners’ “Statement of the Case” is utterly

without foundation in the evidence in stating (p. 9)

“[t]he developer went bankrupt ”" Nor are

Petitioners correct in stating that the trial court

“refused to acknowledge the evidence of bankruptcy”

[of ‘Whale, Inc.’’] as the only evidence tendered on the

subject was admitted into evidence by thetrial court.

The Petitioners mislead when theyindicate that the

developer was a defendant — it is not. Only Respon-

dent Cronk and the realty owner “Four Seasons of

Tennessee, Inc.’’ were ever named defendants — and

6

the majority of the Court of Appeals was correct in

stating that that defendant was two corporations

removed from “Whale, Inc.”.

The many caveats contained in the Property Report

(admittedly thoroughly read by Petitioner Paquin}

pointed out to the public that:

“No assurances of completion can be given...

Completion in these, as in other areas of the

development, will be dependent upon the

satisfactory sale of lots at Four Seasons of

Georgia and the developers ability to secure

adequate financing.” (emphasis added)

It is correct that the developer was one step removed

from “Whale, Inc.”’, but it was not named as a defendant

in this action.

[In addition to the absolute lack of evidence as to any

false or misleading statement in the Property Report,

it now appears that the lot of which Petitioners com-

plain is not the lot as to which Respondent Cronk had

his dealings with Petitioners. It appears that

Petitioners, in some way and at sometime unknown to

Respondent Cronk elected to purchase a lototherthan

the lot shown to them by this Respondent, but the

record is completely silent on the matter and,

therefore, cannot be discussed further.]

Respondent does not agree with Petitioners

“Questions Presented for Review”, because the real

question here posed is whether the findings of fact by

the trial court were clearly erroneous. The Court of

—- —T

Appeals held not. This is not a question for the

Supreme Court of the United States — it was a ques-

tion of evidence.

SUMMARY OF ARGUMENT

Petitioners’ statement of “Questions Presented”

raises “straw-man”™ issues which are not at all in the

case.

This is a case which turned solely on the evidence.

There is no conflict of decisions of Circuit Courts in-

volved. The Regulations under which this case was

decided have since been changed and a decision under

the old regulations controlling in this case would have

no beneficial ““guide-line” effect for the lower courts.

In short, the petition presents nothing warranting this

Court's consideration.

ARGUMENT

I. Alleged “Departure from Usual Course of

Judicial Proceedings”

What is urged by Pecitioners to be a mis-statement

(at one point — it isclearly correctly stated elsewhere)

in the decision of the Court of Appeals as to who the

developer was (it wasn’t a party anyway!) forms the

basis of this portion of the petition. The Developer was

a corporation named “Diversified Land Developers,

Inc.”"’ — its only part in this action was the fact that the

statute makes it (a non-party here) primarily respon-

sible for complying with the requirements of the Act.

It was also the employer of Respondent Cronk. It was

8

the corporate “son” of “Whale, Inc.” and it was the cor-

porate parent of the owner of the land, “Four Seasons

of Tenn., Inc.” the only other defendant (other than

Respondent Cronk) named and served in this case. It

was this other defendant — “Four Seasons of Tenn.,

Inc.’’ — which was the corporation two steps removed

from the Reorganizing “Whale, Inc.”. The Court of

Appeals, in this myriad of “Four Seasons” and other

corporations, in division III of its opinion, put the

burden of the Property Report preparation on the

owner — “Four Seasons of Tenn., Inc.” rather than on

the developer — which really aided petitioners’ case

rather than harming it, since petitioners failed to

name the Developer as a defendant.

Petitioners are plainly in error in indicating to this

Court that the trial court rejected the tendered

evidence of the “bankruptcy” of “Whale, Inc.” :actual-

ly a Chapter X proceeding at all times material

hereto). The evidence was received by the trial court

over this Respondent's objection. The trial court sim-

ply did not find the “bankruptcy” to be controlling in

view of the two corporation gap between a named cor-

porate defendant and “Whale, Inc.” — especially in

view of the fact that both the Developer and the Owner

were “divorced” from “Whale, Inc.” by purchase by

outside owners very early in the Chapter X

proceedings.

In this same section of their brief, petitioners raise a

hitherto non-issue — the applicable statute of

limitations. This is purely a “straw-man”. There was

no plea of the statute — no question but that it had not

run — nothing until this very moment when

petitioners set it up in some vain attempt to obtain this

Court’s Writ of Certiorari.

II. No Conflict of Decisions

Petitioners state that the decision in the case sub

judice conflicts with the decision of this Court in Af-

filiated Ute Citizens of Utah vs. United States, 406 U.S.

128, 153-54 (1972). The truth is that the cases are entire-

ly different, but if anything that case supports the

decision of the lower courts here. Ute Citizens was a

fraud case under S.E.C. Rule 10b-5 in which it was held

that a bank-market maker-transfer agent-virtual

trustee has a duty to disclose to its principals (the

stock owning Utes) the fact known to it that the stock

could be sold for prices higher than that at which the

bank actually sold on behalf of its stockholders-

principals. It is a fraud case.

The case sub judice is not a fraud case. It is nota

10b-5 case. It is an Interstate Land Sales Act case in

which the petitioners received a verdict against the

owner, but did not receive a verdict against the

“lineman” (a guide around the property) — Lt. Col.

Cronk. There was no evidence of any mis-statement of

material fact — much less fraud. Petitioners com-

plaint rests solely on an alleged failure to disclose a

then recent change as to the financial status of a

related, but uninvolved, corporation — which, before

the transaction was completed, was no longer even

related.

10

III. The Supposed Undecided Question of

Federal Law

The trial court held that Respondent Cronk was sub-

ject to the Act (which is exactly what petitioners say

should be decided by this Court). Thus petitioners’

“important question” has already been decided in

their favor. This Court can go no further. The Court of

Appeals said that the trial court’s ruling was more

tavorable to petitioners than that court would be, in

view of Cronk’s relatively minor role in the purchase

by petitioners — but petitioners have not been harmed

by that statement of the Court of Appeals since the

judgment rests on the proposition that Cronk was sub-

ject to the Act.

In the recent case of Foremost-McKesson, Inc. vs.

Provident Securities Company, 423 U.S. _., 46

L.Ed. 2d 464, 96 S. Ct. 508 (January 13, 1976) this Court

held that the analogous S.E.C. Act of 1934 does not im-

pose absolute liability on everyone who has anything

to do with every transaction, saying: “It is inap-

propriate to reach the harsh result of imposing...

liability without fault on the basis of unclear

language. If Congress wishes to impose such liability,

we must assume it will do so expressly or by un-

mistakable inference.” (46 L.Ed. 2d at 478). Petitioners

seek to impose absolute liability on every person

made subject to the Act. Here, on consideration of the

evidence, the trial court properly held that to impose

liability on Respondent Cronk who was completely in-

nocent of any wrongdoing would be too harsh aresult.

This Court. we believe, would agree. The result was

correct and is not in need of review by this Court.

11

WHEREFORE, Respondent Cronk prays that the

petition be denied.

Respectfully submitted,

FLOYD E. SIEFFERMAN, JR..,

Counsel for Respondent Cronk

Of Counsel:

CHAMBERS, SIEFFERMAN,

ROBINSON & COOPER

Suite 464

2200 Century Parkway, N.E.

Atlanta, Georgia 30345

(404) 325-9970

CERTIFICATE OF SERVICE

I hereby certify that three (3) copies of the above and

foregoing Brief have this date been served upon op-

posing counsel of record by placing the same in the

United States mail, postage prepaid and properly ad-

dressed to:

Mr. Claude Y. Paquin

Attorney at Law

1224 Canton Street

Roswell, Georgia 30075

This ___ day of April, 1976.

FLOYD E. SIEFFERMAN, JR.