Appendix — Gordon v. Terry

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1982

Edwin F. Gordon, Petitioner

Vv.

George A. Terry, Sr., et al.,

Respondents

APPENDIX

MacIntyre, Weyant & Reuss

1750 Peachtree Street N. W.

Suite 275

Atlanta, Georgia 30309

(404) 874-9500

Attorney for Petitioner

Daniel I. MacIntyre

APPENDIX "A*

Edwin F. GORDON, Plaintiff-Appellant,

v.

George A. TERRY, Sr., et al.,

Defendants-Appellees.

Edwin F. GORDON, Plaintiff-Appellant,

v.

M.M. OVERSTREET, et al.,

Defendants-Appellees.

Edwin F. GORDON, Plaintiff-Appellant,

Vv.

E. G. GREEN, et al.,

Defendants-Appellees

Edwin F. GORDON, Plaintiff-Appellant,

v.

HOBE PROPERTIES, INC., et al.,

Defendants-Appellees

Edwin F. GORDON, Plaintiff-Appellant,

v.

William Hershey HAMM, III, et al.,

Defendants-Appellees

Nos. 80-5797 to 80-5801

United States Court of Appeals,

Eleventh Circuit

Aug. 30, 1982.

Appeals from the United States

District Court for the Southern District

of Florida.

-2a-

Before FAY, VANCE and ARNOLD*,

Circuit Judges.

FAY, Circuit Judge:

Plaintiff Edwin F. Gordon allegedly

invested approximately four million

dollars in five real estate

syndications. He is seeking rescission

and damages under various sections of

the federal securities acts. The

District Court found as a matter of law

that Gordon had not purchased

"securities interests" and granted

summary judgement in favor of the

defendants. This appeal followed. We

reverse summary judgement as to Green

and affirm as to the remaining

defendants.

* Honorable Richard S. Arnold, U.S.

Circuit Judge for the Eighth Circuit,

sitting by designation.

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I. Procedural History

This is the second time these

consolidated cases have been presented

on appeal. The first appeal was from a

* dismissal for lack of jurisdiction under

Rule 12(b), Federal Rules of Civil

Procedure. In view of the state of the

pleadings which were described as

"verbose, confusing, scandalous, and

repetitious, *+ the panel declined to

1 Gordon v. Green, 602 F.2d 743,

743-44 (Sth Cir. 1979). The

complaints were described thusly:

The various complaints,

amendments,amended amendments,

amendments to amended amendments,

and other related papers are

anything but short, totaling over

4,000 pages, occupying 18 volumes,

and requiring a hand truck or cart

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to move. They are not plain, either.

The Trial Court described the pleadings

as being "extremely long and combin[ing]

into single counts detailed recitation

of evidence and legal arguments complete

with extensive citations of authority."

The Court also observed that a paragraph

from one typical complaint was single

spaced "“extend[ed] the full length of a

legal page and constitute[d] a single

sentence." Much of the pleadings are

scandalous as well. Moreover, we cannot

tell whether complaints filed earlier in

time are to be read in conjunction with

those filed later or whether the amended

versions supersede previous pleadings.

Id. at 744-45 (footnotes omitted)

During the ensuing years, the

complaints and affidavits filed by the

plaintiff have improved. The District

Court found plaintiff's third amended

complaints to be adequate and we agree.

-5a-

reach the merits, finding instead that

the pleadings were not ‘short and plain”

and did not satisfy the requirements of

Rule 8, Federal Rules of Civil

Procedure. The District Court's

judgment was vacated and the case was

remanded for dismissal of the complaints

"without prejudice to the right to

promptly file a complaint in compliance

with Rule 8." Gordon v. Green, 602 F.2d

743, 747 (Sth Cir. 1979) (footnote

omitted).

On remand, the first set of amended

complaints were dismissed by the

District Court on Rule 8 grounds. The

plaintiff then filed second amended

complaints and third amended

complaints. The District Court ruled

that the third amended complaints

-6a-

satisfied Rule 8. The third amended

complaints allege that the defendants

violated various provisions of the

federal securities laws? and also set

forth several state law claims.

2 section 10(b) of the Securities

Exchange Act of 1934, 15 U.S.C. § 78j(b)

(1976), and Rule 10b-5, 17 C.F.R. §

240.10B-5; Sections 5 and 12(1) of the

Securities Act of 1933, 15 U.S.C.§§ 77e,

771(1) (1976); and Section 17(a) of the

Securities Act of 1933, 15 U.S.C. §

77q(a) (1976). The complaints also

allege violations under Section 206 of

the Investment Advisors Act, 15 U.S.C. §

80b-6 (1976). The Supreme Court,

however, has held that no private cause

of action for damages exists under §

206. Transamerica Mortgage Advisors

Inc. v. Lewis, 444 U.S. if 19-25

° ether a private cause of

action may be implied under § 17(a) of

the Securities Act of 1933 has not been

resolved by the Supreme Court, the

former Fifth Circuit, or this Circuit.

-7a-

On the basis of the allegations,

plaintiff's affidavits, and the written

agreements representing each real estate

syndication, the defendants moved for

summary judgment. The day before the

District Court's scheduled summary

judgment hearing, the plaintiff

submitted a set of fourth amended

complaints. Those anendments allege

violations of the Racketeer Influenced

and Corrupt Organization Act (RICO), 18

U.S.C. §§ 1961 et seq. (1976).

Following the hearing, the-District

Court ruled that federal jurisdiction

was lacking and entered an order

granting summary judgment in favor of

the defendants. Leave to amend the

complaints to allege RICO violations was

denied and the pendent state claims were

dismissed.

Two issues are presented on appeal:

whether the denial of leave to amend the

complaints was an abuse of discretion

and whether the real estate syndications

are securities.

II. The RICO Amendments

{1] Amendments to pleadings are

governed by Rule 15(a), Federal Rules of

Civil Procedure. Under the rule, a

plaintiff may amend once, without leave

of court, before responsive pleadings

are served. Any subsequent pleadings

must be with leave of the court, but

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leave to amend “shall be freely given

when justice so requires." Fed.R.Civ.P.

15(a).

Plaintiff Gordon originally filed

suit in April, 1976. Since the original

filing, the plaintiff has filed numerous

complaints and amended complaints. At

no time, prior to his last attempt to

amend the complaints, did the plaintiff

assert a cause of action based on RICO.

The plaintiff had ample opportunity to

assert these claims, yet he waited until

the day before the District Court's

summary judgment hearing to do so,

Counsel for the plaintiff suggested in

his memorandum to the trial court that

the reason for filing the fourth amended

complaints was to avoid decision on the

securities issue.

-l10a-

We conclude that the plaintiff

unreasonably and unduly delayed in

seeking amendment, exhibited bad faith,

dilatory motives and has repeatedly

failed to cure deficiencies in his

pleadings despite numerous

opportunities. Allowing amendment at

this late date would be prejudicial to

the defendants and would not serve the

ends of justice. See Foman v. Davis,

371 U.S. 178, 182, 83 S.Ct. 227, 236, $

L.Ed.2d 222 (1962). The trial court's

denial of leave to amend was not an

abuse of direction. We affirm.

III. A Securities Interest?

A. The Real Estate Syndications

We stress at the outset of our

analysis, the procedural posture of this

-lla-

case. In reviewing a grant of summary

judgment, our inquiry must be whether

the undisputed facts, considered in the

light most favorable to the opposing

party, establish that the moving party

is entitled to judgment as a matter of

law. Adickes v. S. H. Kress & Co., 398

U.S. 144, 157, 90 S.Ct. 1598, 1608, 26

L.Ed.2d 142 (1970); American Telephone &

Telegraph Co. v. Delta Communications

Corporation, 590 F.2d 100, 101-02 (5th

Cir.), cert. denied, 444 U.S. 926, 100

S.Ct. 265, 62 L.Ed.2d 182 (1979). Those

facts, gleaned from the pleadings,

documents, and affidavits filed in this

case, are as follows.

Gordon first met E. G. Green, in

October, 1970. Defendant Green told

Gordon that he was putting together

-l2a-

several real estate syndicates which

would be highly profitable to

investors. Green explained that because

of his contacts, his unique expertise

and his experience with the central

Florida real estate market, he was able

to purchase large tracts of undeveloped

land at bargain prices and to resell the

land within two years for substantial

profits to a pool of developers. Green

explained that the First National Bank

of Palm Beach (the Bank) would act as

trustee, that attorney Gustave Broberg

would prepare the trust documents, and

that Broberg and the Bank would assist

in the management and resale of the

properties. As a result of those

representations, Gordon was persuaded to

invest in five real estate

-l3a-

syndications. Four of the syndications

were governed by trust agreements and

the fifth was governed by a limited

partnership agreement.

Under the trust agreements, a tract

of land is held in the trustee's name

(the Bank) and each beneficiary's

interest is proportionate to the amount

contributed by the beneficiary. The

agreements indicate that their purpose

is to simplify later resale of the

property and disposition of the property

is controlled by majority vote of the

beneficiaries. Under the limited

partnership agreement, George Barley,

Jr., is designated general partner and

Gordon is listed as one of the limited

partners. The agreement indicates that

its purpose is investment in real

-l4a-

property. Disposition of the property

is controlled by majority consent of the

partners.

All five agreements give the

investors substanial control over the

property. Gordon, however, claims that

he did not read the agreements and did

not know their terms when he made his

initial investments. Gordon states that

Green made it a condition of the

investment that none of the investors

meet each other, that they were to deal

only with Green, Broberg, and the Bank,

and that they place absolute faith in

Green.

B. Williamson v. Tucker

[2] Gordon argues that when he

invested in the real estate syndications

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he entered into investment contracts and

thus "securities" under the federal

securities laws.

SEC v. W. J. Howey Co. defines an

investment contract as " a contract,

transaction or scheme whereby a person

{1] invests his money [2] in a common

enterprise and [3] is led to expect

profits solely from the efforts of the

promoter or a third party." 328 U.S.

293, 298-99, 66 S.Ct. 1100, 1102-1103,

90 L.Ed. 1244 (1946). The District

Court determined that Howey's third

element was not satisfied because under

3 an "investment contract" is one of the

terms used by both the Securities Act of 1933

and the Securities Exchange Act of 1934 to

define a "security". 15 U.S.C. §§ 77b(1),

78c(a))10) (1976).

-l6a-

the written agreements the investors, by

majority vote, retained control over all

decisions which would affect the success

of the ventures. 4

4 fhe District Court also ruled that

profits from appreciation in land were

not "profits" under Howey's criteria and

that since appreciation was the source

of profits, there could be no

Significant efforts of others directed

to producing profits. We agree that

investments in land solely for the

purpose of profits from appreciation on

resale cannot be securities. See I L.

Loss, Securities Regulation 491-92

(1962). However, the promises an~

inducements held out to investors must

be considered in determining whether or

not a particular oe ag is a

security. SEC v. C. Joiner Leasir

Corporation, 320 U.S. “a 64 S.Ct. TZ0,

85 Ee Ed. 88 (1943); Grainger v. State

Security Life Insurance Co., 547 F.2d

303 (Sth Cir. 1977), cert. denied, 436

U.S. 932, 98 S.Ct. 2832, 56 L.Ed.2d 777

(1978). Gordon's affidavits claim that

Green promised to locate

bargain-basement priced land, to

structure a leveraging scheme which

would result in early and large profits,

and to supply a pool of developers ready

-l7a~

to snap at the deal. See infra Section

IIIC. These allegations indicated that

Gordon was promised greater profits than

could be expected from simple

appreciation in land values. They also

indicate that Green promised significant

efforts to make those profits happen.

Thus, we agree with the Districts

Court's analysis of the law, but we

cannot agree with its application. The

Significant issue in this case is not

the nature of the expected profits, or

the quality or quantity of the promised

efforts. The determinative issue is the

very real control given the investors by

the written agreements,

-18a-

On appeal, Gordon argues that Williamson

v. Tucker, 645, F.2d 404 (5th Cir.),

cert. denied, U.S. , 102

S.Ct. 396, 70 L.Ed2d 212 (1981), decided

after the District Court entered its

order, requires our reversal.

Under the third criteria of the Howey

definition, the focus is on the

dependency of the investor on the

entrepreneurial or managerial skills of

a promoter or other party. See SEC v.

Koscot Interplanetary, Inc., 497 F.2d

473, 483 (Sth Cir. 1974); SEC v. Glenn

W. Turner Enterprises, Inc., 474 F.2d

476, 482 (9th Cir.), cert. denied, 414

U.S. 821, 94 S.Ct. 117, ?8 L.Ed.2d 53

(1973). An investor who has the ability

to control the profitability of his

-19a-

investment, either by his own efforts or

by majority vote in group ventures, is

not dependent upon the managerial skills

of others. Thus, general partnerships

and other arrangements which grant the

investors control over the significant

decisions of the enterprise are not

securities. See, e.g., Schultz v. Dain

Corporation, 568 F.2d 612 (8th Cir.

1978); Bailard & Cordell Corporation v.

zoller & Danneberg Exploration, Ltd.,

544 F.2d 1059 (10th Cir. 1976), cert.

denied, 431 U.S. 965, 97 S.Ct.2921, 53

L.Ed.2d 1060 (1977); Vincent v. Moench,

473 F.2d 430 (10th Cir. 1973); Hirsch v.

DuPont, 396 F.Supp. 1214 (£.D.N.¥.1975),

aff'd, 553 F.2d 750 (2d Cir. 1977);

Oxford Finance Cos. v. Harvey, 385

-20a-

F.Supp. 431 (E.D.Pa.1974); cf. Cameron

v. Outdoor Resorts of America, Inc., 608

F.2d 187 (5th Cir. 1979), modified on

other grounds, 611 F.2d 105 (5th Cir.

1980) (promoter retained right to manage

property). The written agreements in

this case place control over all

Significant decisions in the hands of

the investors and would seem to mandate

the conclusion reached by the District

court. Williamson v. Tucker,

5 one of the agreements in this case

is termed a “limited partnership’.

Limited partnership interests are

generally held to be securities

interests because the limited partners

have no voice in management decisions.

See, e.g., SEC v. Murphy, 626 F.2d 633

(9th Cir. 1980); Murphey v. Hillwood

-2la-

Villa Assocs., 41l F.Supp. 287 (S.D.N.Y.

1976); Kroungold v. Triester, 407

F.Supp. 414 a Pa. 1975). Hirsch v.

duPont, 396 F.Supp. 1214 (S.D.N.Y.

1975), aff'd, 553 F.2d 750 (2¢ Cir.

1977). The agreement in this case,

however, lacks the attributes of a

limited partnership because it permits

the partners to control, by majority

vote, the general partner's decisions

regarding partnership property.

-22a-

however, articulates a narrow exception

to the general rule.

The investors in that case were

participants in joint ventures in real

estate. The written agreements provided

that any decision regarding the

properties could be made by vote of the

holders of 60% or 70% interests in the

ventures. The investors in each joint

venture expected to either develop the

property or sell it after it had

appreciated in value and the promoter,

Godwin Investments, represented that it

would aggressively pursue those

objectives.

By their terms, the agreements vested

control in the joint ventures and the

Fifth Circuit noted that there could be

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no security if “the power retained by

the investors is a real one which they

are in fact capable of exercising." Id.

at 419. Proceeding from that point, the

Court recognized that under certain

circumstances an investor may be

incapable of exercising a power given by

a written agreement. If that were the

case, the investor would be in a

position of dependency. With no real

means of protecting his investment, he

would be forced to rely on others for

his hoped for profits.

One situation envisioned by the Court

was a dependency on another's

-24a-

specialized expertise. ® In setting

forth this exception, the Court

carefully delineated the circumstances

which would create the sort of

dependency contemplated by investment

contract analysis. The fact that the

investor has delegated management duties

or has chosen to rely on some other

party does not establish dependency.

6 wo other examples were given:

(1) an agreement among the parties

leaves so little power in the hands

of the partner or venturer that the

arrangement in fact distributes power

as would a limited partnership; or

(2) the partner or venturer is so

inexperienced and unknowledgeable in

business affairs that he is incapable

of intelligently exercising his

partnership or venture powers ...

645 F.2d at 424, The Plaintiff

relies on neither of these examples

and we see nothing in the record to

indicate that they would be

applicable.

-25a-

The investor must have "no reasonable

alternative to reliance on that

person." Id. at 423. That is, the

investor must be “forced to rely on some

particular non-replaceable expertise."

Id. As an example, the Court indicated

that "investors may be induced to enter

a real estate partnership on the promise

that the partnership's manager has some

unique understanding of the real estate

market in the area in which the

partnership is to invest." Id.

The panel emphasized that when

agreements provide investors with

substantial control, a plaintiff

claiming forced reliance on another is

faced with a difficult burden of proof.

"Such an investor must demonstrate that,

in spite of the partnership form which

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the investment took, he was so dependent

on the promoter or on a third party that

he was in fact unable to exercise

meaningful partnership powers." Id, at

424 (footnote omitted). And, in order

to survive a motion to dismiss or a

motion for summary judgment, the

plaintiff must allege at a minimum that

the promoter “was uniquely capable of

such tasks or that the [investors] were

incapable, within reasonable limits, of

finding a replacement manager." Id. at

425.

C. Gordon's Allegations - A Genuine

Issue of Fact?

[3] Gordon argues that Williamson

requires our reversal of the summary

judgment order. And, indeed, where

-27a-

there exists a factual question as to

Gordon's dependency we must reverse.

But we begin with the written

agreements. They undeniably give Gordon

control through his voting powers over

the fate of his investments. Such

control precludes a finding of a

security interest unless dependency in

the narrow sense articulated by

Williamson could be found to exist. In

our opinion, dependence upon the skills

of one or more defendants does not

establish dependency upon all

defendants. Williamson requires an

examination of the representations and

promises made by promoters or others to

induce reliance upon their

entrepreneurial abilities. Where

representations or promises have not

-28a-

been made or where, if made, they do not

involve claims of unique entrepreneurial

Or managerial abilities, the dependency

required by Williamson cannot exist. We

therefore examine Gordon's allegations

and uncontroverted affidavits as they

pertain to each defendant.

Green: Green, a central Florida real

estate broker, promoted the land

investment syndications. Gordon claims

that he relied upon Green's skills and

expertise, and that Green represented

that he was an expert in selecting

bargain-priced central Florida

properties which could be resold to his

pool of developers within two years at

large profits; that [t]he investors’

property would be used ... to provide

-29a-

the financial basis for the developer he

selected and thereby give [the]

investors a resale price that involved

part of the developer's profit"; that he

could make such deals because of his

contacts and his unique expertise; and

that only he knew how to structure the

deals.

Broberg, the Bank, and Barley:

Attorney Broberg drafted the trust

agreements and the Bank served as

trustee for the four land trusts.

Barley was named general partner in the

partnership agreement. Gordon claims

that Green represented that his team of

money managers consisted of Broberg and

the Bank; that Broberg and the Bank

assured Gordon that Green was brilliant

and that Gordon was fortunate to be an

-30a-

investor in the syndications; that

Broberg and the Bank “claimed great

abilities in managing other people's

funds"; and that all three defendants

represented that they would take care of

the "managerial legal, and resale

operation.”

The Sellers:7 The Sellers owned

7 The Terrys, George Terry, Sr., Mary

Terry, George Terry, Jr., and Netsy

Terry; the Overstreets, Estate of M. M.

Overstreet, Jeannette Overstreet,

Jennings Overstreet, and Jo Ann

Overstreet; the "Hovey Trust”

defendants, Alice Rhoades, George

Coleman, Dudley Sutphin, Harold Heye,

Virgil Scherrill, Henry Rudkin, Samuel

Sutphin, Pierre Heftler, and William

Rudkin; Francis Buckley, representing

Hobe Properties, Inc., and Hobe Sound

Estates, Inc.; and the Hamms, William

Hamm and Edward Hamm. It appears from

the record that George Terry, Jr., Netsy

Terry, George Coleman, William Hamm, and

Edward Hamm were never properly served.

Those persons were therefore not before

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the District Court when it entered its

summary judgement order and are not

before this Court on appeal. Since they

are not parties to the case, our ruling

does not extend to them. Moreover,

Gordon dismissed the Terrys with

prejudice in April, 1976. Gordon claims

that Gordon v. Green permits him to

cename the Terrys as defendants in his

third amended complaint. The Gordon

panel held that “the filing of a proper,

decent, acceptable amendment will relate

back to the original filing." 602 F.2d

at 747. If the Terrys couid properly be

named in the complaints Gordon would

permit relation back. AS it is, they

were dismissed with prejudice and it

appears that their inclusion is not

proper. However, the District Court did

not rule on this issue. In view of our

holding, infra, we need not and do not

address the issue of relation back as it

applies to the Terrys.

-32a-

property which was acquired by the five

real estate syndications.® Green

makes no claim that these defendants

ever made any representations. His

complaints and his affidvaits assert

only that the sellers “conspired"® with

Green and that Green was their "agent".

9

The "Inside" Investors: These

defendants were co-investors in certain

of the real estate syndications.

Again, no claim is made that these

8 apparently a two-tiered transaction

was involved. The sellers sold the

property to Heminway Corporation, which

was substantially owned and controlled

by Green. The Heminway Corporation in

turn sold the property to the real

estate syndications.

T. R. Anderson, Robert D. Lacey,

Pierre Heftler, and William Rudkin are

named as “defendant inside investors."

-33a-

defendants ever represented anything to

Gordon. Gordor alleges only that they

"conspired" with Green and that Green

was acting under their “control.”

[4] We believe that taking the

allegations as supported by affidavits

in the light most favorable to Gordon,

they are sufficient to preclude summary

judgment as to Green only. Gordon has

set forth specific statements made by

Green which, if proven, demonstrate that

Green represented himself to have unique

knowledge regarding the real estate

market in central Florida and the

contacts and expertise.to structure

highly profitable deals. Whether

Green's represented skills created the

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dependency contemplated by Williamson is

a question of fact which cannot be

resolved on the present record. Gordon

must be given an opportunity to prove

his assertions.

[5] In contrast, the allegations and

Claims against the other defendants are

far from sufficient to raise a factual

question.

Regarding the Bank, Broberg, and

Barley, Gordon's assertions demonstrate

that the Bank and Broberg had confidence

in Green's expertise, that they assured

Gordon his investments were in good

hands, and that they claimed to be

skilled in their respective

occupations. Last, we are told that all

-35a-

three defendants agreed to manage the

syndications. In order to establish a

genuine factual dispute, affidavits must

set forth facts which are relevant to a

viable legal theory. Spectrum Financial

Cos. v. Marconsult, Inc., 608 F.2d 377,

380 (9th Cir. 1979) cert. denied, 446

U.S. 936, 100 S.Ct. 2153, 64 L.Ed.2d 788

(1980); First National Bank Co. v.

Insurance Co. of North Ame"ica, 606 F.2d

760, 766 (7th Cir. 1979). The alleged

Statements and acts of these defendants

simply do not raise an issue of

dependency under Williamson's narrow

exception. Gordon does not contend that

the three defendants possessed unique

knowledge or skills, nor does he set

forth facts from which we could infer

-36a-

such expertise. Summary judgment as to

the Bank, Broberg, and Barley is

therefore affirmed.

Regarding the sellers and the

co-investors, the record is, for all

practical purposes, non-existent. The

complaints and affidavits allege no

specific facts or representations

nertaining to these defendants. Bare

assertions that the defendants

"conspired," "controlled," or retained

Green as their “agent” are insufficient

to create an issue as to Gordon's

dependency on these defendants or to

demonstrate the sort of relationship

betweer. the defendants and Green which

would create a question as to imputed

-37a-

knowledge or responsibility.

Conclusory allegations such as these,

without specific supporting facts, have

no probative value. SEC v. Bonastia,

614 F.2d 908, 914 (3d Cir. 1980);

Broadway v. City of Montgomery, 530 F.2d

657, 660 (5th Cir. 1976);

Benton-Volvo-Metaire, Inc. v. Volvo

Southwest, Inc., 479 F.2d 135, 139 (5th

Cir. 1973). Summary judgment as to the

10 we note that in conjunction with

their motion for summary judgement,

Anderson and Lacey submitted affidavits

in which they denied having any

connection, either as sellers or as

co-investors, with the Magnolia Ranch

real estate investment, Case No.80-5797,

the only case in which they were

served. Gordon has not responded to

their assertions.

-38a-

sellers and the co-investors is

affirmed,

Our opinion deals with a very narrow

issue, jurisdiction under the federal

securities laws. The protection

provided by the securities acts is not

limitless, not every fraudulent

commerical transaction falls within

11 he District Court granted summary

judgment as to all the defendants

although some of the defendants never

responded to the third amended

complaints. In view of the tortured

procedural history of this case, the

full and fair summary judgment hearing

afforded by the tial judge, and

particularly in view of the fact that no

party has raised the issue, we have

determined that a remand limited to

those defendants, based on such a

technicality, would not be in the

interests of judicial economy. We

therefore affirm summary judgment as to

all defendants but Green.

-39a-

their ambit. Marine Bank v.

Weaver, U.S. at ’

102 S.Ct. 1220 at 1223, 71 L.Ed.2d 409

(1982) ("Congress, in enacting the

securities laws, did not intend to

provide a broad federal remedy for all

fraud.") The allegations and affidavits

in this case are sufficient to raise an

issue only as to Gordon's dependency on

Green's skills. The plaintiff may have

common law and statutory claims against

the remaining defendants, but he does

not have a securities claim. In

selecting the federal securities acts as

a means to obtain redress, Gordon has

chosen a most difficult route. On

remand he will be faced with the burden

of proving that his dependency on Green

-40a-

rendered him incapable of exercising the

powers the written agreements vested in

him. His path would have been more

direct and much simpler in a state

court. Summary judgment is reversed as

to defendant Green and affirmed as to

the remaining defendants.

AFFIRMED IN PART, REVERSED IN PART

and REMANDED.

VANCE, Circuit Judge, concurring in

part and dissenting in part:

I concur in the reversal as to

defendant Green. I dissent with respect

to defendants Broberg, Barley, Heminway

-4la-

Corporation and First National Bank in

Palm Beach; and would reverse the

summary judgment in favor of those

defendants. I concur in the result of

the affirmance as to all other

defendants.

APPENDIX "B"

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

CASE NO. 76-8151-Civ-CA

76-8152-Civ-CA

76-8153-Civ-CA

76-8154-Civ-CA

76-8155-Civ-CA

EDWIN F. GORDON,

Plaintiff,

vs ORDER OF DISMISSAL

GEORGE A. TERRY, SR.,

et al.,

Defendants.

aff

THESE CASES are before the Court on

several motions for summary judgment and

for dismissal for failure to state a

Claim. The Court, having considered the

various legal documents and affidavits

submitted by the parties conciudes that

there is no genuine issue of material

fact and grants the defendants’ motions

-2b-

for summary judgment in each of the

above-styled cases.

PROCEDURAL HISTORY

Before discussing the merits of the

summary judgment motions, a brief

description of the procedural history of

these cases is required. The plaintiff,

Edwin F. Gordon, first filed his

complaints in the Southern District of

New York in March and April of 1976.

The cases were transferred to the

Southern District of Plorida and

assigned to Judge Charles Fulton. Due

to a prior encounter with defendant

Green, Judge Fulton regretfully recused

himself while several motions were

pending. The cases were re-assigned to

this Court.

-3b-

The complaints as originally drafted

were virtually incomprehensible but the

Court (mistakenly it turned out)

nevertheless endeavored to ascertain

their meaning. The complaints were

accompanied by a multitude of

affidavits, supporting documents,

amendments and amendments to

amendments. The Court, unable to

decipher the language of the various

written documents, set the cases for a

hearing in September of 1976 in order to

allow the plaintiff an opportunity to

explain what he was attempting to assert

in the various complaints. Immediately

prior to the hearing the plaintiff filed

yet another amendment to the amended

complaints.

-4b-

At the hearing, at which plaintiff

and his counsel responded frankly to

certain questions regarding the subject

matter of the complaints, the Court

concluded that the plaintiff had failed

to allege that a security was involved

and, as a result, the Court was without

jurisdiction. See Transcript of Hearing

on Motions, September 20, 1976. The

Court's conclusion was subsequently

expressed in an Order and memorandum

dated September 30, 1976. In that Order

the Court noted that a dismissal for

failure to comply with Fed.R.Civ.P. 8

would also have been appropriate

considering the state of the plaintiff's

pleadings.

On appeal, the Pifth Circuit

declined to decide the securities

-5b-

issue. Instead, the appellate court

took a brief look at the voluminous

pleadings and concluded that the

Plaintiff had failed to comply with

Rules 8(a) and 8(c), requiring a short

concise statement of the facts

supporting a claim for relief. The

Fifth Circuit vacated this Court's

previous Order and remanded the cases

for re-pleading. While the Court

regrets the Fifth Circuit's avoidance of

the dispositive securities issue, the

Fifth Circuit's conclusion that the

original pleadings should have been

dismissed was certainly warranted.

Since the remand the plaintiff has

filed three sets of amended complaints.

The first set of amended complaints,

though shorter and clearer than the

-6b-

Original pleadings, suffered from many

of the same deficiencies. The amended

complaints were largely conclusory and

failed to state the factual basis for

the plaintiff's claims. The plaintiff

then filed his "Second Amended

Complaints” and, before the Court ruled

on the sufficiency of those complaints,

his "Third Amended Complaints". The

Third Amended Complaints comply with

Rule 8. Although the allegations

continue to be somewhat conclusory

rather than factual, they are

sufficiently clear to enable the Court

and the parties to determine the basis

of the plaintiff's claim for relief.

At this point several of the

defendants, growing impatient with the

seemingly infinite number of amended

~~

complaints, called for summary

judgement. The defendants Green and

Heminway Corporation moved for an

evidentiary hearing for purposes of

demonstrating that these cases are

factually identical to Morsey v. Green,

Case No. WPB-76-8044-Civ-CA. In Morsey,

a case involving defendant Green and a

transaction essentially the same as the

transactions alleged by this plaintiff,

this Court concluded after a trial

pursuant to Rule 42(b), that no security

was involved. That decision was

affirmed by the Fifth Circuit without

opinion. Morsey v. Green, 615 F.2d 417

(5th Cir. 1980).

The plaintiff requested a

continuance in order to prepare a reply

to the various motions for summary

-8b-

judgement. The Court granted the

continuance and set the cases for a

hearing. The hearing was to be limited

to the issue of whether a security is

involved. The plaintiff was given a

month and a half in which to depose the

principle defendants for purposes of

eliciting facts in support of his theory

that what he purchased was a security.

As a result of various scheduling

conflicts, plaintiff claims that he was

1

unable to conduct the depositions.

Instead of requesting a continuance,

1 counsel for the defendent Green

asserted at the hearing that Green was

available for a deposition and that the

plaintiff simply failed to schedule it.

-9b-

however, the plaintiff waited until

approximately a week before the

scheduled hearing and then sought to

cancel the hearing. In his motion to

cancel the plaintiff also asked the

Court to recuse on the ground that the

Court had heard and decided portions of

the Morsey case. The plaintiff's motion

for recusal was wholly without merit and

was denied. Order of July 24, 1980.

See, e.g. In Re Corrugated Container

Anti-trust Litigation, 614 F.2d 958 (5th

Cir. 1980).

The Court granted the plaintiff's

motion to cancel the hearing and

notified the parties that the summary

judgement motions would be decided

without benefit of a hearing. . Shortly

thereafter, the plaintiff submitted

-10b-

Still another memorandum of law and an

additional affidavit in support of his

theory that the interest he purchased is

a security. The plaintiff also

requested oral argument on the pending

summary judgment motions.

At this point, the Court was

somewhat perplexed by the plaintiff's

vacillating requests but nevertheless

reset the cases for oral argument. On

the day before the scheduled hearing,

the plaintiff submitted the latest in a

now illustrious series of amendments.

The latest amendment alleges violations

of the Racketeering Influenced and

Corrupt Organizations Act, 18 U.S.C.

§§1961, et seg. ("RICO"). Accompanying

the proposed amendment was a memorandum

stating that a hearing was no longer

-llb-

necessary because the Court had

jurisdiction under the RICO Act.

Disregarding the latest amendment for

the present, the Court proceeded with

Oral argument.

After this long convoluted history

the Court is in essentially the same

position in which it found itself four

years ago. The complaints are better

drafted but the claims are essentially

the same. Despite the plaintiff's

numerous factual allegations and legal

memoranda, the Court is compelled to

reach the same conclusion reached in

September of 1976: There is no security

alleged; the claims based on the federal

securities laws must be dismissed and;

assertion of pendent jurisdiction over

the remaining claims is not appropriate.

-12b-

I. Whether the interests purchased by

the plaintiff constitute securities.

The allegations which support the

plaintiff's theory that a security is

involved may be summarized as follows,

In October 1970, the plaintiff, Dr.

Gordon, met with defendants, E. G.

Green, Gustave Broberg and First

National Bank of Palm Beach (hereinafter

"FNBPB"). Green told Dr. Gordon that he

was in the process of organizing various

land investment syndicates which would

yield substantial profits to the

investors. Green represented that

because of his vast familiarity with

land sales in Florida, he was able to

purchase large tracts of land at bargain

prices and to resell the land to

-13b-

developers at a substantial profit.

Broberg and FNBPB assured Gordon that

Green was an extremely knowledgeable

Florida real estate broker. According

to the third amended complaints and

Gordon's various affidavits, Gordon was

persuaded to commit himself to investing

$10 million and actually invested $4.5

million with Green, Broberg and FNBPB

who promised to manage the plaintiff's

fund and to invest those funds in

various land syndicates.

In cases No. 76-8151 through 8154

the transactions were designated “trust

agreements". The agreements specified

that a tract of land was to be held in

the trustee's name for the benefit of .

the various contributors/beneficiaries.

Each contributor received an interest in

-14b-

the trust proportionate to the amount

contributed. Gordon's interests varied

from 10% of the Overstreet trust

agreenent (No. 8152) to 30% of the Hobe

trust (No. 8153) to 40% of the Magnolia

Ranch (No. 8151) and Hamm trusts (No,

8154).

Paragraph 2 of each trust agreement

vests control over disposition of the

trust in the beneficiaries:

2. That in transacting any business

relative to the property, especially

in selling the same and determining

the terms under which the sale of

said oy ody | will be made, the

Trustee shall be governed and

controlled by the majority consent

of the Beneficiaries in accordance

with their percentage of ownership,

and all parties hereto shall be

bound and controlled by such

decision. When a bona fide offer is

received and a majority agree to

accept said offer, any or all of the

minority shall have t right to

retain ownership of the property by

-15b-

purchasing the interest of the

majority on the same terms and

conditions as the offer.

The trust agreements do not

contemplate any development of the

various tracts of land, nor were any

representations made that any of the

defendants would personally undertake

development. Green did represent that

he knew of developers who were willing

to purchase the land within two

years,? The only purpose behind

2 plaintiff's latest affidavit,

submitted after the hearing, claims that

development was anticipated but the only

development contemplated appears to be

by subsequent purchasers and. not the

defendants who sold the interests in the

trust agreement to Gordon. Whether

subsequent purchasers chose to develop

the land has no bearing on the issue of

whether the interest purchased by Gordon

constitutes a security.

-16b-

forming the trusts was to create a

device for holding the land for later

resale. Paragraph 8 of the agreements

so states:

8. This is the joint venture of

the rties, with each party being

liable for his portion of any

liability incurred or any tax

incurred. The purpose of the

parties in making this trust

agreement is solely for the

simplicity in holding title and

conveying.

In case No. 8155 the alleged

security is an interest in a limited

partnership. The limited partners were

given somewhat less control over

management of partnership affairs. With

the exception of the decision to sell

partnership real estate, the general

partner was given the power to make all

decisions regarding the partnership. In

-17b-

the partnership, as in the trust

agreements, no development was

contemplated. The partnership was

formed solely for the purpose of

investing in land.

Dr. Gordon's version of the

transaction varies from the terms of the

agreements. Dr. Gordon claims that he

never read the agreements until shortly

before instituting this suit. According

to Dr. Gordon, the terms of the

agreement form no part of the investment

he made. Dr. Gordon claims, simply,

that he placed complete trust in Green,

Broberg and FNBPB and turned over $4.5

million to these defendants to dispose

of at their discretion. While Dr.

Gordon may have been unaware of the

terms of the agreements, it is

undisputed that he was not prevented

-18b-

from reading the agreements prior to

signing and that the terms provide for

substantial control by the beneficiaries.

A. The Trust Agreements

In this Court's Order and memorandum

opinion dated September 30, 1976, the

Court concluded that the trust agreement

interests do not constitute securities,

For the reasons stated in that opinion

and for the reasons that follow, the

Court concludes, again, that the trust

agreement interests do not constitute

securities,

The term “security” is not

specifically defined by the federal

securities acts but the term does

include an “investment contract*. 15

U.S.C. § 77(b)(1); 15 U.S.C. §

73(c)(a)(10). Generally, an investment

in land in the hope of realizing a

-19b-

profit from appreciation in the value of

the land is not considered an investment

contract. As described by Professor

Loss in his treatise on securities,

The line is drawn, however, where

neither the element of a common

enterprise nor the element of

reliance on the efforts of another

is present. For example, no

"investment contract" is involved

when a person invests in real

estate, with the hope perhaps of

earning a profit as the result of a

general increase in values

concurrent with the development of

the neighborhood, as long as he does

not do so as part of an enterprise

whereby it is expressly or impliedly

understood that the property will be

developed or operated by others.

1 Loss, Securities Regulation 491-92 (2d

Ed. 1961).

An investment in land may constitute

an investment contract if the investment

meets the Supreme Court's definition of

an "investment contract" in SEC v. W. T.

Howey Co., 328 U.S. 293, 398-99 (1946):

-20b-

. « « & contract, transaction, or

scheme whereby a person invests his

money in [1] a common enterprise and

is led to [2] expect profits [3]

solely from the efforts of the

promoter or a third party, it being

immaterial whether the shares in the

enterprise are evidenced by formal

certificates or by nominal interests

in the physical assets employed in

the enterprise.

Only if all three elements are present

does an investment in land constitute a

security. See Cameron v. Outdoor

Resorts of America, Inc., 608 F.2d 187

(Sth Cir. 1979).

1. Common Enterprise

The first element of the Howey test

- a common enterprise - is clearly met.

Each of the participants cooperated in

the purchase of land through the trust.

The funds of the individual investors

was pooled so that the large tracts

-21b-

could be purchased. The pooling of

funds for investment is generally

considered sufficient to constitute a

"common enterprise". See, e.g. Hirk v.

Agri-Research Council, Inc., 561 F.2d

96, 100 (7th Cir. 1977).

2. Expectation of Profits

The second element of the Howey test

- expectation of profits - is not

present in these transactions. Profits

for securities purposes means “either

capital appreciation resulting from the

development of the initial investment .

+ « OF participation in earnings from

the use of the investors' funds... ."

United Housing Inc. v. Forman, 421 U.S.

837, 852 (1975). Gordon's profits were

to come solely from appreciation of the

land not appreciation through

development. No development of the land

-22b-

was even contemplated. See, e.g., SEC

v. Joiner Leasing Corp., 320 U.S. 344

(1943) (profits expected from promoter's

promise to drill exploratory oil well);

Cameron v. Outdoor Resorts of America,

Inc., 608 F.2d 187, 193 (5th Cir. 1979)

(profits expected from promoter's

promise to provide and manage various

campsite facilities on undeveloped land

purchased by investors). Nor was Gordon

led to expect profits through earnings

from the use of his funds such as rental

payments of dividends. See Tcherepin v.

Knight, 389 U.S. 332 (1967) (dividends).

Merely because real estate market

trends may affect whether a profit is

realized, however, does not by itself

exclude the transaction from the purview

of the securities laws. Market trends

affect every investment to some extent.

-23b-

See Altschuler v. Cohen, 471 F.Supp.

1372, 1380 (S.D. Texas 1979). If,

however, profits are anticipated solely

from appreciation in land value and not

from any development by the promoter or

third party, no security is involved.

See, e.9., Cameron, supra at 193; Davis

v. Rio Rancho Estates, Inc., 396 F.Supp.

1045 (S.D.N.Y.) 1975); Happy Investment

Group v. Lakeworld Properties, Inc., 396

F.Supp. 175 (N.D. Cal. 1975); Weiner v.

Brown, 356 So.2d 1302 (Fla. 3 DCA 1973);

McConathy v. DalMac Commercial Real

Estate, Inc., 545 S.W.2d 871

(Tex.Civ.App. 1977). 1 Loss, Securities

Regulation 491-92 (1961); Real Estate as

Securities: Sales of Residential

Subdivision Lots, 1979 Wash. U.L.Q. 965,

985-88.

3. Solely from the Efforts of Others

-24b-

The third element of the Howey

definition - solely from the efforts of

others - is also lacking.

While many lower courts have not

read the Howey language literally, the

efforts of others necessary to render a

transaction an investment contract must

be at least the "undeniably significant

ones, those essential managerial efforts

which affect the failure or success of

the enterprise." SEC v. Glenn W. Turner

Enterprises, Inc., 474 F.2d 476, 482

(9th Cir.) cert. denied, 414 U.S. 921

(1973). The only effort offered by

these defendants was to seek out

qualified purchasers. The defendants

promised no development nor any

significant management services. The

"failure or success of the enterprise”

was dependent primarily on the

anticipated rise in

-25b-

land value, not any effort on the part

of the defendants.

That profits were expected from the

anticipated rise in the value of land

and not from the efforts of the

defendants is made clear by

consideration of the risk taken by the

plaintiff. In the typical land based

security, the purchase price of the

security exceeds the value of the land.

This is because the investor is

purchasing, in addition to the interest

in land, the promise of the promoter to

develop. Since the purchase price

exceeds the market value of the land,

the buyer risks a loss if the promoter

fails to perform. See, e.g. McCown v.

Heidler, 527 F2d 204 (10th Cir. 1975);

Real Estate as Securities: Sales of

Subdivision Lots, 1979 Wash. U.L.Rev

-~26b-

965, 987. By contrast, Gordon paid,

according to his own affidavits, below

market value for the land. There was no

premium attached to the price of the

land which would account for the efforts

of the defendants. Since Gordon paid

bargain rates for the land, Gordon took

no risk that the defendants would fail

to perform. Even if the defendants did

nothing, he retained his interest in the

land and could sell it to recover all of

his investment.

Moreover, the trust agreements

provide for control of the trust by

majority vote of the beneficiaries. The

beneficiaries were relying on their ewe

entrepreneurial skills, not those of

Green. Gordon, as owner of substantial

shares in each agreement, possessed even

greater power over disposition of the

-27b-

trusts than did most other beneficiaries.

The securities laws were not meant to

apply where disposition of the

investment is subject to the control of

the investors. See, e.g., Mr. Steak,

Inc. V. River City Steak, Inc., 460 F.2d

466 (10th Cir. 1972).

The scheme can best be described as

a joint venture for the purchase of

land. The agreements so describe

themselves in paragraph 8. Because each

joint venturer has a voice in the

affairs of a venture, the essential

element of reliance on the "efforts of

others” is lacking and, as a result,

joint ventures are not generally

considered securities. See, e.g.,

Oxford Finance Cos. v. Harvey, 385

F.Supp. 431 (D.C. Pa. 1974). A joint

venture may be considered a security

-26b-

where the investor is denied any real

participation in management affairs,

see, @.g., Andrews v. Blue, 489 F.2d

367, 371 (10th Cir. 1973), but not where

the investor has the right to

partivipate and merely fails to exercise

that right. Pargo Partners v. Dain

Corp., 540 F.2d 912, 915 (8th Cir.

1976). The use of the trust device does

not magically transform this joint

purchase of land into purchase of a

security.

The plaintiff has referred the Court

to several recent cases which he

contends requires the conclusion that a

security is involved. The cases cited

are substantially dissimilar to this

case as a quick review will demonstrate.

The most recent case cited by the

plaintiff is Cameron v. Outdoor Resorts,

Inc., 608 F.2d 187 (5th Cir. 1979).

Outdoor Resorts developed a campsite

composed of nearly a thousand lots.

Outdoor Resorts promised to make

significant improvements to the

undeveloped lots including the

construction of swimming area, a golf

course, tennis courts and utility

connections. The lots were sold to

individuals for personal use. Outdoor

Resorts retained the right to rent the

lots in the owner's absence and to pay

the rent received to the owners after

deducting certain operational and

managerial expenses. The Fifth Circuit

concluded that a security was involved

since profits were to be realized as a

result of appreciation through the

promised development and the lot owners

relied solely on the managerial efforts

-30b-

of Outdoor Resorts. A statement of the

facts shows the dissimilarity between

Cameron and this case. Here profit is

expected from increase in land value

without development, in Cameron profit

arose from the development of the

campsites. Moreover, the campsite

owners, unlike Gordon, had no voice in

the management of their investment.

The recent decision in Altschuler v.

Cohen, 471 F.Supp. 1372 (S.D. Texas

1979) is similarly distinquishable. In

Altschuler, the participants purchased

four per cent interests in a land

syndicate in anticipation of profits

from resale of the land. The court

found that the interests purchased

constituted securities because "[ijt was

not contemplated that [the participants]

themselves would actively participate in

-3lb-

the affairs of the venture." 471

F.Supp. at 1380. The court's analysis

of the securities issue is notably

sparse but even assuming the correctness

of the decision, the decision does not

compel a finding of a security in this

case. Unlike the participants in

Altschuler, the trust beneficiaries in

this case had the right to participate

in all management decisions.

Finally, the plaintiff cites Bartels

v. Algonguin Properties, Ltd., 471

F.Supp. 1132 (D.Vt. 1979). Like the

participants in Altschuler, the limited

partners in Bartels were not permitted

to participate in management decisions.

In addition, the funds supplied by the

limited partners were used for

development of the land purchased by the

partnership. The right of Gordon to

-32b-

participate in management decisions and

the lack of any development distinquish

Gordon's investments.

The plaintiff has also attempted to

characterize his beneficial interest as

a “discretionary account in lané.* Some

courts, including the Fifth Circuit,

have concluded that discretionary

accounts in commodities futures

contracts may constitute securities.

See Moody v. Bache, 570 F.2d 523 (5th

Cir. 1978); SEC v. Continental

Commodities Corp., 497 F.2d 516, 522

(5th Cir. 1974). But see Milnarik v.

M-S Commodities, 457 F.2d 274 (7th

Cir.), cert. denied, 409 U.S. 887

(1972). See generally Moreno,

Discretionary Accounts 32 U. Miami L.

Rev. 401 (1977). The commodities cases

are inapposite. The volatility with

-33b-

which commodities are bought and sold is

not present in land transactions. When

one invests in a commodities account,

reliance is placed on the broker's

expertise in selecting which commodities

to purchase or sell and when to purchase

and sell them. The broker's expertise

in buying and selling are the “efforts

of others" which make a commodity

account a security. See SEC v.

Continental -Commodities Corp., supra at

522. A sale or purchase of land, on the

other hand, requires compliance with

numerous formalities. Land is not

bought and sold overnight. More

importantly for this case, unlike a

commodity account broker, Green did not

have complete control over the decisions

to buy or sell. Even assuming that

Green chose which tracts of land would

-34b-

yield the greatest profits, Gordon was

required to acquiesce in each purchase

by signing the appropriate trust

agreement. If Gordon was not interested

in the particular tract, he could simply

not enter into the agreement. The mere

fact that Gordon trusted Green to

recommend lucrative properties does not

render the investment a security.

Moreover, commodities futures investors

have no authority over the sale of the

commodities contracts. Gordon did have

the right to stop the sale of the land

or to seek out a willing purchaser if he

thought a sale appropriate.

The cases cited by the plaintiff are

Significantly different from this case.

Two state cases not cited by the

plaintiff are significantly more

analogous. McConathy v. Dal Mac

-35b-

Commerical Real Estate, Inc., 545 S.W.2d

871 (Tex. Ct. Civ. App. 1977); Weiner v.

Brown, 356 So.2d 1302 (Fla. 3d DCA

1978). In both cases the transactions

were virtually identical to Gordon's

trust investments and in both cases no

security was found under the state

securities law.

In McConathy v. Dal Mac Commerical

Real Estate, Inc., supra, investors

purchased shares in a joint venture

virtually identical to the transaction

in this case. The stated purpose of the

joint venture was to buy and hold a

parcel of real estate “as an investment

which we hope will appreciate in value

during the holding period. We

anticipate selling the property for a

profit at some future date and realizing

a capital gain." 545 S.W.2d at 874

-36b-

(quoting from the joint venture

agreement). The agreement, signed by

all the participants, provided for

management by a single individual and

for participation of the venturers in

any decision regarding sale of the

land. The agreement, like the

agreements in this case, provided for

forfeiture upon failure to make a

required contribution. There was even

dispute as to whether the plaintiff had

read the agreement. Id. The court

concluded that no security was involved

because the joint venture lacked an

essential element of an investment

contract. According to the Texas court,

"[e]fforts' of a promoter or others

means operational, managerial or

developmental efforts. . . not... the

mere holding of property in anticipation

-37b-

of appreciation in value." 545 S.W.2d

at 875. Moreover, there was no reliance

on the skills of a promoter since each

venturer had the right to participate in

the decision to resell. Id. at 876.

A similar scheme was considered in

Weiner v. Brown, 356 So.2d 1302 (Fla. 3d

DCA 1978). The transaction described in

Brown is exactly the same as the

transaction in this case. A real estate

broker induced several persons to

participate in the purchase of a certain

tract of unimproved land. The property

was purchased in the name of two

trustees. As the court described the

scheme:

The property thus acquired was to he

held for resale, hopefully at a

profit. No development or

improvements were made thereon, and

no business was conducted thereon.

-38b-

There was no plan or expectation to

receive profits from the efforts of

any other persons, or from any

source other than by favorable

resale. The control of the property

was in the beneficiaries. The

trustees were authorized to

negotiate for resale opportunities,

but the trustees were required to

notify the beneficial owners of any

proposed resale, and no such sale

would be made if objected to by

one-third or more of the

beneficiaries. The trust agreement

additionally provided for the

trustees to collect the amounts when

due from the beneficiaries for

required payments of mortgage

principal and interest, and taxes,

assessments or other expenses.

There was a provision that upon

default by a beneficial owner in

payment of such items due from him

the other beneficiaries would be

charged ratably therefor and the

interest of the defaulting

beneficiary would be forfeited. It

was provided that the trust would

continue until the "assets have been

liquidated and distributed" which,

in this instance, would be until the

property was resold and the proceeds

distributed.

356 So.2d at 1304. Applying the Howey

definition of a security, the court

-39b-

concluded that no security was

involved. The court held that merely

taking title in the name of a trustee

did not transform a purchase of land

into a purchase of a security. The use

of the trust device was merely for the

convenience of the purchasers who

themselves retained ultimate control

over disposition of the land.

The foregoing makes clear that the

trust agreements, on their face at

least, are not securities. The

agreements lack the essential elements

of "profits solely from the efforts of a

promoter or third party." SEC v. Howey,

Supra. The profit was anticipated from

the rise in land -- not from any

development of the investment. The

efforts of the promoters was limited to

seeking out purchasers. The trust

-40b-

beneficiaries retained substantially

complete control over management and

disposition of the various tracts of

land. Disregarding form for substance,

the scheme is simply a joint purchase of

real estate. See SEC v. Howey Co., 328

U.S. 293, 300 (1945); United Housing

Foundation v. Forman, 421 U.S. 837

(1975). The use of the trust device, by

itself, does not transform the purchase

of land into a purchase of securities.

The plaintiff has raised a broader

claim, however. He asserts that the

Court should ignore the terms of the

trust agreements and instead decide the

issue of whether a security is involved

solely on the basis of the oral

representations allegedly made to Gordon

by Green, Broberg and FNBPB. Gordon

claims, that he never even read the

~41b-

provisions of the trust agreements until

shortly before bringing this action.

In deciding whether a purchaser has

been offered a security, a court cannot

ignore the representations made by the

offeror. The determination of whether

an instrument constitutes a security

requires a court to “take into account

all the circumstances attending the sale

+ «+ « « © Grainger v. State Security

Life Insurance Co., 547 F.2d 303 (5th

Cir. 1977). The Court does not read

Grainger as requiring a court to ignore

the written terms of an agreement,

however, merely that the terms of an

agreement are not dispositive of the

issue of whether a security is present,

To completely ignore the terms of a

written instrument would be just as

great an error as to ignore the oral

-42b-

representations.

Even assuming Gordon was induced to

purchase interests in the various trusts

by Green's representations that Gordon

need not participate in any of the

details, Gordon has still failed to show

the existence of a security. Green's

representations amount to little more

than the representations of any real

estate broker seeking to sell land as an

investment. See Timmreck v. Munn, 433

F.Supp. 396, 403n.4 (N.D.I11. 1977).

Green told Gordon the land would make a

good investment because it was in a

prime location and ripe for development.

Green also promised to provide

developers who would purchase the land

from the trusts at a substantial

profit. Essentially, Green promised to

act as a real estate broker. Acceptance

-43b-

of the plaintiff's theory that Green was

offering the sale of a security would

require the Court to conclude that

nearly every real estate broker who

deals in real estate for investment is a

securities dealer. Such an extension of

the securities laws is wholly

unwarranted. See, United Sportfishers

v. Buffo, 597 F.2d 661 (9th Cir. 1979);

McCown v. Heidler, 527 F.2d 204, 208

(10th Cir. 1975); 1 Loss, Securities

Regulation 491-92 (2d Ed. 1961).

B. The Limited Partnership.

This Court's Order of September 30,

1976 did not address the issue of

whether interests in the Barley limited

partnership agreement constitute

securities. Limited partnership

interests, because they often meet the

Howey definition, are generally

-44b-

considered. securities. See, e.g.,

Nor-Tex Agencies, Inc. v. Jones, 482

F.2d 1093 (5th Cir. 1973); S.E.C.

Release No. 33-4877, CCH Fed.Ser.L.Rptr.

q1046. There is a strong presumption

that limited partnership interests are

securities, but whether a particular

limited partnership interest constitutes

a security requires an independent

consideration of the Howey definition.

See Stowell v. Ted S. Finkel Investment

Services, Inc., 489 F.Supp. 1209 (S.D.

Fla. 1980). Consideration of Howey

shows that the interest purchased by

Gordon does not constitute a security.

The Florida Uniform Limited

Partnership Act, Fla. Stat. §620.01, et

seg. (1979) gives a limited partner the

right to inspect partnership books,

request an accounting, seek dissolution

-45b-

of the partnership and to receive a

share of partnership profits. Fla.

Stat. §620.10. A limited partner has no

right to participate in decisions

affecting the disposition of partnership

property and if he does participate he

loses his status as a limited partner.

Pla. Stat. §620.07. Limited partnership

interests are freely transferrable.

Fla. Stat. §620.19. The general

partners have virtually absolute control

over all decisions affecting the

business of the partnership including

sales of the partnership's real

property. Fla. Stat. 9620.09. Because

of these provisions, most limited

partnership interests in Florida

constitute securities.

The Barley limited partnership,

however, does not comply with the

-46b-

Florida Limited Partnership Act. Unlike

typical limited partners, the Barley

limited partners have the right to

participate in decisions regarding sale

of the partnership's real property.

3 paragraph 19.2.1 of the Barley

partnership agreement provides:

Nothwithstanding any other

provisions of this agreement, before

any sale of real peers owned by

the Partnership may consummated,

the General Partner shall, more than

fifteen days prior to the

consummation of the proposed sale of

the property, notify each of the

limited partners in writing of such

proposed sale and of all of the

terms and conditions of the proposed

sale. Provided, however, such notice

shall no: be necessary to establish

authorization of the General Partner

to make a sale if affirmative

approval of or consent to the

proposed sale has ‘een received from

the holders of 51% of the outstanding

capital account units. Such notice

shall be made by first class mail,

postage prepaid, at the address of

each Limited Partner as shown in the

records of the Limited Partnership.

-47b-

Under the Florida Partnership Act,

general partners, not limited partners,

are given the right to participate in

such decisions. See Fla. Stat. §620.09,

-605 (1979). Moreover, like general

partnership interests, the Barley

limited partnership interests are not

freely assignable. 4 Compare Fla. Stat.

§620.19 (limited partnership interest

assignable) with Fla. Stat. §620.69

(general partnership interest may be

assigned only by agreement of other

partners).

4 paragraph 17.1 of the Barley

Partnership Agreement provides:

No partner shall have the right to

sell, transfer, pledge, or otherwise

dispose of his interest in the

Partnership, or any portion thereof,

without first obtaining written

consent of the General Partner.

-48b-

Since the Barley limited partnership

does not have the attributes of the

typical limited partnership, closer

consideration of the Howey elements is

required to determine whether the

limited partnership interests are

securities. Merely labeling the

agreement a limited partnership does not

relieve the Court of the necessity of

analyzing the transaction in light of

the Howey definition of a security.

Economic reality, not the labels affixed

to an interest determine whether a

security has been alleged. See

Tcherepin v. Knight, 389 U.S. 332, 336

(1967), United Housing Corp. v. Forman,

421 U.S. 837, 351-52 (1975). The Barley

limited partnership interests are not a

security because they lack the elements

of (1) profit, (2) from the efforts of

-49b-

others.

As discussed above, profits for

purposes of the securities laws do not

include gain from the appreciation of

land. The profits from the limited

partnership, like those from the trust

agreements, were to come solely from

appreciation of land. No development of

the land was contemplated. The

partnership appears to have been created

solely for the purpose of holding the

land in hopes that the real estate would

appreciate.

Moreover, while the scope of control

retained by the Barley limited partners

is somewhat less than that retained by

the trust beneficiaries, it is clear

that the limited partners did retain

control over the only decisions which

would materially affect the success of

-50b-

the scheme. See SEC v. Glenn Turner,

Supra. No sale of the Barley tract

could be consummated without the express

consent of the limited partners. Since

the only apparent purpose of the

partnership was to hold the land for

resale, the limited partners effectively

controlled the only decision of the

partnership which would affect profits.

Gordon, as holder of a 30% interest in

the partnership, had significantly more

control over whether the partnership

realized a profit than even the general

partner. Accordingly, it cannot be said

that profit was to arise solely from the

efforts of others.

The Court concludes that interests

in the Barley limited partnership, like

interests in the various trust

agreements, are not securities. The

-5lb-

counts of the plaintiff's complaint

dealing with securities must be

dismissed.

II. Plaintiff's proposed Amendment to

include RICO violations.

The plaintiff, on the eve of oral

argument on the securities issue, filed

a motion for leave to amend his

complaints to allege violations of the

Racketeering Influenced and Corrupt

Organization Act (RICO). 18 U.S.C.A.

§1961 et seg. (Supp. 1980).

Leave to amend is freely granted

under Fed.R.Civ.P. 15(a).- See Foman v.

Davis, 371 U.S. 178, 182 (1962):

In the absence of any apparent or

declared reason--such as undue

delay, bad faith or dilatory motive

on the part of the movant, repeated

failure to cure deficiencies by

amendments previously allowed, undue

prejudice to the opposing party by

-52b-

virtue of allowance of the

amendment, futility of amendment,

etc.--the leave sought should, as

the rules require, be ‘freely given.’

Several of the factors mentioned in

Foman as sufficient to support a denial

of leave to amend are present here.

l. Undue delay.

These cases were originally filed in

March of 1976. If any facts support the

RICO charge they were certainly as

available then as they are now. The

plaintiff has filed numerous amended

complaints and amendments to his amended

complaints. In none of his previous

amendments did the plaintiff even hint

at this new theory. The plaintiff has

offered no valid reason for the delay.

His failure to offer any justification

for this delay is sufficient reason to

deny leave to amend. See, e.g. Wealden

-53b-

Corp. v. Schwey, 482 F.2d 550, 552 (5th

Cir. 1973).

2. Bad faith or dilatory motive.

The plaintiff in his memorandum

candidly admits the purpose behind this

latest amendment. Plaintiff filed the

motion solely to delay decision on the

security issue. The motion is patently

in bad faith and cannot be condoned even

under the liberal standard of Rule 15.

See, e.g. Billy Baxter, Inc. v.

Coca-Cola Co., 47 F.R.D. 345, 346

(D.C.N.Y¥. 1969), aff'd., 431 F.2d 183

(2d Cir.) cert. denied, 401 U.S. 954

(1970); Matlack, Inc. v. Hupp Corp., 57

F.R.D. 151 (D.C.Pa. 1972).

3. Repeated failure to cure

deficiencies by amendments previously

allowed.

-54b-

The number of amended complaints and

amendments to ainended complaints allowed

in this action has already been

described. Reference to the Fifth

Circuit's opinion and the subsequent

history of these cases demonstrate the

substantial deference afforded this

Plaintiff. Further amendments, not

directed at clarifying his existing

claims, but solely at delaying final

resolution of the cases cannot be

tolerated.

4. Undue prejudice.

The proposed RICO amendment presents

an entirely new issue which could not

have been anticipated by these

defendants. As a result, allowing the

amendment would force the defendants to

incur even greater expense in defending

this action. The defendants have

-55b-

already been subjected to one fruitless

appeal as a result of the plaintiff's

abuse of the federal rules of pleading

and should not be forced to suffer any

greater delay in reaching a just

resolution of these cases.

5. Futility.

The Court notes that there is

substantial doubt as to whether the

proposed amendment even states a cause

of action. Compare Barr v. WUI/TAS,

Inc., 66 F.R.D. 109 (S.D.N.¥. 1975)

(allegations of mail fraud without some

. Showing of defendant's connection to

organized crime does not state a civil

cause of action under RICO) with Pannes

v. Heinhold Commodities, Inc., 487

F.Supp. 645 (N.D. Texas 1980)

(allegations of mail fraud alone may

state civil cause of action under RICO).

-56b-

For the foregoing reasons the Court

concludes that leave to amend to add

Count IX to plaintiff's third amended

complaint must be DENIED.

III. The Pendent State Claims.

In the Order dated September 30,

1976 the Court concluded that exercise

of pendent jurisdiction over the

remaining state claims after dismissing

the federal securities claims was

inappropriate. Relying on United Mine

Workers v. Gibbs, 383 U.S. 715, 726

(1966) the Court concluded that since

the only federal claim was dismissed

before trial, exercise of pendent

jurisdiction was unwarranted. See

generally, Stowell v. Ted S. Finkel

Investment Services, Inc., 489 F.Supp.

1209, 1214-1218 (S.D.PFla. 1980)

-57b-

(assertion of pendent jurisdiction over

Florida fraud claims in a federal

securities action is generally

inappropriate).

Generally if a federal claim is

dismissed before trial, the court must

aismiss all pendent state claims absent

extraordinary circumstances. See Kavit

v. A.L. Stamm & Co., 491 F.2d 1176 (2d

Cir. 1974); Hendrickson v. Westland

Material Corporation, 463 F.Supp. 826

(S.D. Fla. 1978). The plaintiff has

pointed to two considerations which he

maintains require the Court to retain

jurisdiction over the pendent claims:

(1) If the pendent claims are dismissed,

the plaintiff may be barred from

complete recovery because of the

applicable statutes of limitation and;

(2) if the pendent claims are dismissed,

-58b-

all the time and money expended by the

plaintiff in pursuit of his federal

claims will have been wasted. The Court

finds these consideration unpersuasive,.

The plaintiff has already filed five

separate actions in state courts which

deal with essentially the same issues as

alleged in this action. Circuit Court

of Orange County Nos. 77-3782, 3783,

3784 (Barley, Overstreet and Terry).

Circuit Court of Broward County No.

77-7145 (Hobe) and Circuit Court of

Martin County No. 77-377 (Hamm). The

only claims which appear to be barred by

the statute of limitation are some of

the plaintiff's claims for violation of

the state securities laws. Gordon v.

Overstreet, 373 So.2d 476 (Fla. 4 DCA)

cert. denied, 376 So.2d 72 (1979). The

Court has already concluded that the

-59b-

plaintiff has not alleged a federal

security. In view of the Court's

resolution of that issue and Weiner v.

Brown, 356 So.2d 1302 (Fla. 3 DCA 1978)

(discussed above) the Court would be

compelled to conclude that no state

security has been alleged. Accordingly

retention of the state security claims

would not be helpful to the plaintiff.

The plaintiff's various claims of

fraud and breach of fiduciary duty are

governed by Fla. Stat. §95.11(3)(1)(p)

which provide for limitations periods of

four years from the date the fraud is

"discovered or should have been

discovered." Fla. Stat. §95.031(2)..

Plaintiff filed his various state claims

in May of 1977 and has stated that he

discovered the fraud in March 1976.

Clearly, his claims are not barred by

‘

-60b-

the applicable Florida Statute.

Moreover, to the extent that any clains

are barred, they are the result of the

plaintiff's failure to file his state

Claims immediately after this Court's

original dismissal in September 1976 put

him on notice that his claims might not

be cognizable in federal court.

Plaintiff's contention that the

Court sould retain jurisdiction because

of the expense he has already incurred

in pursuing his federal claims is

absurd. The vast majority of

plaintiff's expense is a direct result

of his own failure to comply with the

federal rules. As the Fifth Circuit

stated in its opinion vacating this

Court's original dismissal:

-61b-

If our holding results in more time

and expense to appellant, that would

be fair recompense for these marked,

unjustifiable violations of the

letter and spirit of the Federal

Rules of Civil Procedure and an

indifference as though they had

never been adopted 41 years ago.

602 F.2d at 747

With the demand on this district by

the Speedy Trial Act and civil actions

of which there is clear jurisdiction, it

is unreasonable to expect pendent

jurisdiction to be retained under the

circumstances present in these cases,

The plaintiff has failed to show any

reason for retaining jurisdiction over

the remaining state claims and they are

hereby dismissed. |

For the foregoing reasons, the

defendants’ motions for summary

judgement are GRANTED. The plaintiff's

-62b-

claims based on the federal securities

laws are dismissed with prejudice. The

pendent state claims are dismissed

without prejudice. The plaintiff is

free to pursue his claims in state court,

DONE AND ORDERED at Miami, Florida,

this 5th day of September, 1980.

(SL Clyde Atkins

ITED STATED DISTRICT JUDGE

COPIES FURNISHED:

All Counsel of Record

APPENDIX "°C*

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

No. =

EDWIN F. GORDON, .

Plaintiff-Appellant

versus

GEORGE A. TERRY, SR., Et Al.,

Defendants-Appellees.

EDWIN F. GORDON,

Plaintiff-Appellant

versus

M. M. OVERSTREET, Et Al.,

Defendants~-Appellees.

-2c-

EDWIN F. GORDON,

Plaintiff-Appellant

versus

E. G. GREEN, Et Al.,

Defendants-Appellees

No. -—

EDWIN F. GORDON,

Plaintiff-Appellant,

versus

HOBE PROPERTIES, INC., Et Al.,

Defendants-Appelles.

“No. 80-5801

EDWIN F. GORDON,

Plaintiff-Appellant,

versus

WILLIAM HERSEY HAMM, III, Et Al.,

Defendants-Appellees,.

Appeal from the United States District

Court for the Southern District of

Florida

ON PETITIONS FOR REHEARING AND

NC

(Opinion: August 30, 1982, 11 Cir.,

1982, F.2d -)

( , 1962)

BEFORE FAY, VANCE, and ARNOLD*, Circuit

Judges.

PER CURIAM

The Petitions for Rehearing are DENIED

and no member of this panel nor Judge in

regular active service on the Court

having requested that the Court be

polled on rehearing enbanc (Rule 35,

Federal Rules of Appellate Procedure;

Eleventh Circuit Rule 26), the

Suggestions for Rehearing En Banc are

also DENIED.

ENTERED FOR THE COURT:

(s) Peter Fay

United States Circuit Judge

*Hon. Richard S. Arnold, U.S. Circuit

Judge for the Eighth Circuit, sitting by

designation.

APPENDIX "D"

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

EDWIN F. GORDON,

Plaintiff

AFFIDAVIT OF PLAINTIFF

vs.

GEORGE A. TERRY, SR., ET AL.,

76 Civ. 1461

Defendants Judge Robert J. Ward

vs.

M.M. OVERSTREET, ET AL.,

76 Civ. 1462

Defendants Judge Robert J. Ward

vs.

WILLIAM HERSEY HAMM, III, ET AL.,

76 Civ.

Defendants Judge Robert J.

vs.

HOBE PROPERTIES, INC., ET AL.,

76 Civ.

Defendants Judge Robert J.

vs.

E.G. GREEN, ET AL.,

76 Civ.

Defendants Judge Robert J.

STATE OF FLORIDA

COUNTY OF BROWARD

Personally appeared before me, a

1465

Ward

1466

Ward

1931

Ward

Notary Public in and for said State and

County, EDWIN F. GORDON, to me known,

who being duly sworn, deposes and says:

-3d-

l. I am the Plaintiff in the above

five causes of action and I am

personally familiar with the background,

circumstances and personalities involved

in these matters. ...

5. I am formulating this Affidavit

in an admittedly somewhat unusual

manner, but in a manner which I most

sincerely believe is fitting and proper

for the highly unusual circumstances

that characterize these five very

closely related cases. I am, for the

convenience of the Court as well as all

Defendants in all five cases, going into

considerable detail as to the first case

to be filed in the Court, 76 Civ. 1461,

involving George A. Terry, Sr., Et Al,

as Defendants, which contains well

documented evidence to substantiate all

-4d-

substantive factors which appear in all

the cases. Then I am attaching a

comparative analysis for the substantive

factors which appear in each of the five

cases, as compared with the same

substantive factor in other cases. ...

8. I am now presenting below, a

brief summary of the salient facts and

factors in the Terry case, both for the

information of the Court and for the

information of all others who read this

Affidavit. ... [t]he real substance of

the set-up regarding the Terry

securities (as well as the securities

involved in the other four closely

related cases) was that Green, assisted

by Broberg as his attorney, assumed full

and complete management authority in the

text-book sense of the person or persons

-5d-

"to whose efforts I, as an investor in

these common enterprises, looked to

produce the hoped-for profits in each

enterprise."

My point is that, regardless of any

particular writings that might appear in

any one or more of the five cases, the

fact that a particular writing does not

appear in the files of a given case, is

in the nature of an administrative

and/or operational detail, WHICH IN NO

WAY CHANGES THE OVERRIDING SIMILARITY IN

SUBSTANCE OF ALL FIVE CASES.

I. The Terry Case - 76 Civ. 1461

The facts in the Terry Case are

Simple and to the point. The owners of

the Terry real estate and the Terry

cattle ranching operation in Orange

County, Florida, through their Orlando

-6d-

attorney, Robert C. Matthias, conspired

with E.G. Green and Gustave T. Broberg,

Jr. to greatly inflate the true value of

the lands underlying the Terry

securities, mislead the other people in

the investment Syndicate put together by

Green, and deliberately omitted to

inform the other people in the

investment syndicate, that the Terry

ranch lands had been (just a few months

before the sale of the Terry securities)

re'classified by the Board of County

Commissioners of Orange County, Florida

so that the lands were either classified

as "Flood Plains," or as "Agricultural."

In Florida real estate of

substantial size which is not in a city,

the "Agricultural" classification is to

be expected; however, when investors

-7d-

pool their money (as the investors did

in the case of the Terry securities) and

permit a trusted fiduciary agent such as

Green to invest the pooled money in land

presently classified as "Agricultural,"

the usual expectation is that the

powers-that-be in the particular area

will, in due course, change the land

Classification from "*Agricultural"® to

something else which is more conducive

to development as residential,

commercial or otherwise.

This is the type of normal

development pattern that was represented

by Green to the investors, including

myself, and was a falsehood. Green

deliberately misled me (both by

commission and by omission) on several

other key points about the Terry

-8d-

situation that I needed in order to make

an informed investment judgment,

including the following:

(a) Green did not inform me about

the drastic land reclassification action

taken by the Orange County

Commissioners, several months before the

investment syndication bought the Terry

securities.

(b) Green affirmatively mislead me

and affirmatively misinformed me when he

told me that the lands underlying the

Terry securities could be developed into

commercial areas and residential areas.

This was a falsehood, and Green knew it

or should have known it.

(c) Green affirmatively mislead me

and affirmatively misinformed me when he

stated that the underlying lands in the

-9d-

Terry securities were a “great bargain"

and that "buyers are waiting in the

wings to buy from your group." In fact,

the underlying lands were greatly

overpriced, and no buyers were in

evidence to “take out" our investment

syndication.

(d) Green mislead me by omission

when he failed to disclose to me that

the Terry Cattle Ranch operation had

been losing money for several years;

Green further mislead me by omission

when he failed to tell me that the

Magnolia Ranch as an overall entity had

been losing money due to high mortgage

interest cost on a highly leveraged

first mortgage in favor of Federal Land

Bank of Columbia, South Carolina.

-10d-

Broberg was as substantially in the

wrong in the Terry transaction as Green

was; and Broberg joined in the

affirmative misrepresentations made by

Green .... Green and Broberg were in

constant and ongoing communication; and

whatever Green knew about the underlying

real estate, Broberg was also charged

with the same knowledge. To add insult

to injury, Broberg permitted myself and

the other third-party investors to pay

him substantial feel fer so-called

"legal services rendered to me," when

(in actual fact), Broberg was

representing the interests of Green and

the sellers of the Terry securities.

I also want to clarify, once and for

all, this question:

Be ii oy de

a" ee

-lld-

"Was the Terry situation run by the

investment syndicate, or was the

Terry situation run by third-parties

to whom the money investors looked

for the generation of profit in the

enterprise as a whole?"

My answer to this question is clear and

unequivocal:

"The Terry situation was NOT run by

the investment syndicate; the Terry

situation was run by Green (assisted

by Broberg as his attorney), who

also was the real and substantial

mangagement power with respect to

the Terry cattle ranch operation,

directing George Terry, Jr. and

others who had certain day-by-day

ranching and related duties to

perform under the so-called

Management Services Contract of June

12, 1973 with Terry Cattle Company."

+ « « representations made to me by

Green and Broberg, regarding the actual

management functions that they (Green

and Broberg) were taking on--regardless

of what a so-called trust agreement or

-~12d-

any other written instruments might seem

(on its face) to say to the contrary.

QUESTION:

Did the issuers of the securities

make any disclosures or other

representations to me, as an

investor, with respect to the above?

ANSWER:

76 Civ. 1461 Terry

No. All contacts of any kind on

these matters were through Green,

Broberg and their creature

corporation, known as The Heminway

Corporation. The issuers of the

securities made no moves to make

disclosure of any of the factors

pertaining to the underlying real

-13d-

estate that would have been material

to an investor considering an

investment in these securities.

76 Civ. 1462 Overstreet

Same as above.

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

-14d-

QUESTION:

Did Green and Broberg solicit my

confidence in them as professional

fiduciaries?

ANSWER:

76 Civ. 1461 Terry

Yes; and furthermore, insisted upon

having their investors put full

confidence in their investment

advice, decisions, and management

control as a prerequisite for doing

business with them as an investor.

76 Civ. 1462 Overstreet

Same as above.

76 Civ. 1465 Hamm

Same as above.

-15d-

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

QUESTION:

Who represented the issuers of the

securities as attorney-at-law and

was paid legal fees by the issvers,

either directly or indirectly?

ANSWER:

76 Civ. 1461 Terry

Broberg.

76 Civ. 1462 Overstreet

Broberg.

-16d-

76 Civ. 1465 Hamm

Broberg.

76 Civ. 1466 Hobe

Broberg.

76 Civ. 1931 Green (Hovey Securities

Resale)

Broberg.

QUESTION:

Who represented E. G. Green (as

securities salesman in these

securities issues), and otherwise

represented E. G. Green as his

attorney-at-law?

ANSWER:

76 Civ. 1461 Terry

Broberg.

-17d-

76 Civ. 1462 Overstreet

Broberg.

76 Civ. 1465 Hamm

Broberg.

76 Civ. 1466 Hobe

Broberg.

76 Civ. 1931 Green (Hovey Securities

Resale)

Broberg.

UVESTION:

Did Broberg (in fact) represent the

issuers of the securities at the

same time that he was holding

himself out as representing my best

-18d-

interests (as my attorney) in these

various

ANSWER:

76 Civ.

securities transactions?

1461 Terry

Yes; and furthermore, Broberg never

suggested that I have independent

counsel, but gave the impression he

and Green were professional

fiduciaries acting in my behalf and

in my best interest.

76 Civ.

1462 Overstreet

Same as

76 Civ.

above.

1465 Hamm

76 Civ.

above.

1466 Hobe

Same as

above.

-19d-

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

UESTION:

Did Broberg ever make any disclosure

to me of this conflict of interest?

ANSWER:

76 Civ. 1461 Terry

No. He assured me my interests were

in good hands and he and Green would

handle any question I might have.

76 Civ. 1462 Overstreet

Same as above.

76 Civ. 1465 Hamm

Same as above.

-20d-

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

QUESTION:

Did I have outside counsel in any of

these cases, and did either Green or

Broberg ever recommend that I obtain

outside counsel?

ANSWER:

76 Civ. 1461 Terry

No. I relied completely on Green

and Broberg and they solicited a

fiduciary relationship with me,

76 Civ.

-21d-

1462 Overstreet

Same as

76 Civ.

above.

1465 Hamm

76 Civ.

above.

1466 Hobe

76 Civ.

above.

1931 Green (Hovey Securities

Resale)

Same as

QUESTION:

above.

What disclosure was made of relevant

factors

pertaining to underlying

real estate for each of the

securities issues, with knowledge of

which an investor would have been

-22d-

likely not to invest in the

securities?

ANSWER:

76 Civ. 1461 Terry

None. Green stated he had found an

investment of great profit potential

and solicited my investments based

upon complete confidence in his

promise to handle everything and

make a profit on my investment

dollars.

76 Civ. 1462 Overstreet

Same as above.

76 Civ, 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

-23d-

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

QUESTION:

What are some of the salient factors

that I have uncovered (through the

independent investigations of myself

and my agents) with respect to the

actual state of affairs of the true

and proveable realistic economic

values of the real estate underlying

each of the securities which are the

subject of the following cases at

Bar?

ANSWER:

76 Civ. 1461 Terry

Not worth the price paid, loss

-24d-

operation in agriculture, no

development potential.

76 Civ. 1462 Overstreet

Not worth price paid, large

hard-to-market parcel.

76 Civ. 1465 Hamm

Not worth price paid, large

hard-to-market parcel.

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

QUESTION:

-25d-

Did Broberg, in behaving as though

he were my attorney and professional

fiduciary, ever advise me that I was

investing in securities, and that

Green was a securities salesman.

ANSWER:

76 Civ. 1461 Terry

No. Brogerg expressed to me his

happiness for me that I made the

fortunate decision to be one of the

lucky people to invest with Green

with whom Broberg had a long and

completely honorable and

fantastically successful business

association and he assured me my

investment with Green was in good

hands, thereby giving Green his

personal endorsement.

~26d-

76 Civ. 1462 Overstreet

Same as above,

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

No. Broberg remained silent

although he knew of the transaction

and told me I was making a good deal

on this Green resale.

UESTION:

Did Broberg advise me as to Greer.'s

conflict. of interest as agent for

-27d-

the sellers and as investor

fiduciary?

ANSWER:

76 Civ. 1461 Terry

No. Broberg stated that Green was

an unusually honorable and talented

man who was often involved in very

complicated roles in business, but

that Broberg had found Green to be

able to sort out the right thing to

do for all parties who trusted in

him and Broberg further stated high

high regard for Green and Green's

record of fulfilling his promise of

making profits for his investors and

Broberg advised me to let Green

handle everything as Green requires

and all will go well and if there

are any detailed matters that come

-28d-

up, then all of the files and

records on this complicated deal are

in Broberg's office so he can answer

any queries for me, presumably as my

attorney advisor.

76 Civ. 1462 Overstreet

Same as previous answer.

76 Civ. 1465 Hamm

Same as above. .

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

No. Broberg remained silent

although he worked actively with

-29d-

Green to sell the deal to the Barley

investment syndicate.

QUESTION:

Did I meet or discuss this

investment with the other investors

in the group before making my

investment decision?

ANSWER:

76 Civ. 1461 Terry

No. Green and Broberg stated that

it was a hard and fast rule of

investing with Green that there was

no contact between investors and

such contact was all to be handled

by Green or Broberg in behalf of

Green or the trustee exclusively to

protect the identity and privacy

from the public eye of these

-30d-

important jet-set personalities and

they used the example over and over

again of Henry Ford II as a typical

renowned investor person who did not

want to be bothered with details and

just wanted results in the form of

investment profits as promised by

Green and Ford had complete faith

and put complete reliance in Green

and Broberg to handle investments

for him and further, that I, as an

investor, shovid not expect to

socialize with any investor by means

of introductions by Green and/or

Broberg because the privacy of these

important people was being protected

by Green and Broberg as a matter of

policy with Green.

-3ld-

76 Civ. 1462 Overstreet

Same as previous answer.

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

No. Barley made all the contacts

with other limited partners and I

have not met the other partners at

any time and Barley has worked with

Green in his investment syndicate.

-32d-

UESTION:

What representations did Green and

Broberg make regarding the so-called

trust agreement?

ANSWER:

76 Civ. 1461 Terry

Green and Broberg stated it was

merely a simple legal means to hold

title to property so public records

would not disclose names of

important people like Pord, etc. who

wished to have privacy.

76 Civ. 1462 Overstreet

Same as previous answer.

76 Civ. 1465 Hamm

Same as above.

-33d-

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Green and Broberg stated that the

Same trust arrangement was used in

the Barley deal for the usual

protection of the sellers who were

represented by Green and Broberg as

in the other investment syndicates.

UESTION:

What representations did Green and

Broberg make regarding the

forfeiture clause in the trust

agreement ?

76 Civ. 1461 Terry

-34d-

Green and Broberg stated that it was

a special privilege for me to be a

member participant in this exclusive

group in investors and that Green

always had many other investors

anxious to participate in any one

syndication, from his following of

over 300 great people, and that all

of these people relied completely

upon Green and Broberg to handle

this or any investment for them and

that all the other investors

required this “forfeiture clause" to

be assured that they as investors

would never be called on to fulfill

obligations for others in the

investment syndicate and for that

reason the other investors insisted

on a tough forfeiture clause to

protect

-35d-

them, even though Green and

Broberg thought it was too tough and

had never been tested as to legality

in trust matters or used against any

investor because every investor was

always happy to make their payments

and keep their membership in the

exclusive investment group in good

standing.

76 Civ.

1462 Overstreet

Same as

76 Civ.

above.

1465 Hamm

Same as

76 Civ.

previous answer.

1466 Hobe

Same as

above.

-36dG-

76 Civ. 1931 Green (Hovey Securities

Resale)

The Barley Limited Partnership

Agreement contained similar

provisions to enforce timely

payments from limited partners,

QUESTION:

Did Green and Broberg explain to me

that the trust agreement was really

a means to collect money from the

investors in behalf of the sellers

and the sellers agents, Green and

Broberg?

ANSWER:

76 Civ. 1461 Terry

No. Green and Broberg explained to

me that the trust agreement was a

clever means to assure me of

-37d-

deductions for interest payments

against my income subject to

ordinary income tax and to give me a

clear-cut capital gain investment

treatment by IRS when the property

(underlying the securities) was sold

and all this per the opinion of the

best tax counsel in the country,

with whom they consulted for the

protection of all their clients in

these investment matters.

76 Civ. 1462 Overstreet

Same as above.

76 Civ. 1465 Hamm

Same as previous answer.

-38d-

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

Same as above.

QUESTION:

Did Green and Broberg say they were

going to manage the project in each

investment syndicate?

ANSWER:

76 Civ. 1461 Terry

Yes. They stated that Green, with

any help needed from Broberg, his

attorney, assumed complete

management and resale authority and

that each investor was asked to

pledge allegiance to this concept so

-39d-

Green could direct the trustee and

have the trustee turn all

information over to him for handling

in secrecy so the only contact

between the trust and the outside

world was through Green; ...

76 Civ. 1462 Overstreet

Same as above.

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

76 Civ. 1931 Green (Hovey Securities

Resale)

-40d-

Green has actively worked to sell

the Barley property (along with the

lands underlying the Overstreet and

Hovey deals) as one package and

expects to split commissions with

Barley on the resale as he did on

the private placements of securities

as already described in the original

pleadings of 76 Civ. 1931, filed on

April 28, 1976.

QUESTION:

Did the trustee follow these

directions by Green and work with

Green as the manager of each

investment syndication?

ANSWER:

76 Civ. 1461 Terry

-4ld-

Yes. Any questions directed to the

trustee regarding the business of

the investment syndicate either from

an investor or from the outside

world were referred to Green and/or

Broberg

as Green's attorney, and

this was stated to me by the trust

officer

76 Civ.

handling these matters.

1462 Overstreet

Same as

76 Civ.

above.

1465 Hamm

Same as

76 Civ.

above.

1466 Hobe

76 Civ.

above.

1931 Green (Hovey Securities

Resale)

-~42d-

George Barley performed the

management function directly, but

allowed Green to present the

property underlying she respective

investment syndications for sale by

Green to others as part of a larger

package deal, including the

Overstreet, Hovey and Barley tracts

combined.

QUESTION:

Was a formal arrangement ever made

with Green to manage the affairs of

the trust?

ANSWER:

76 Civ. 1461 Terry

No. Green stated that he wanted to

remain low-key and inconspicuous in

the business world so other brokers

-43d-

and business people would not know

how extensive his control of

business matters was in any given

area or so others would not know of

his specific investment control, so

he would be free to gather

information and wheel and deal for

the benefit of his investors to whom

he was devoting his life and sacred

honor, so he could fulfill his

promise to make a profit for his

investors in keeping with his self

avowed great performance record, so

Green stated he wanted nothing in

writing as to his management

authority over the trust business

and so it was handled by him

secretly.

-440-

76 Civ. 1462 Overstreet

Same as above,

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

QUESTION:

Did Green ever admit to his various

investment syndications that he is

the paid agent representing the

sellers, at the same time that he is

functioning as the exclusive

management and control element in

directing the affairs of each

investment syndication?

-45d-

ANSWER:

76 Civ. 1461 Terry

Yes. At a meeting of the investors

in each investment syndication at

the Holiday Inn, Jupiter, Florida,

on January 30, 1976 (which meeting

was called and arranged for by Green

and Broberg on their own volition,

ever, to the extent of getting hotel

rooms for those attending the

sessions), Green stated clearly to

the investors in each investment |

syndication that he is the paid

agent representing the sellers to be

paid his commission on all principal

and interest payments made by the

‘buyers (investors), and he also

stated that he is the exclusive

management and control element in

~46d-

directing the affairs of each

investment syndication, including

possible resales to other groups of

investors.

During the Jupiter sessions, Green

repeated what I have so often heard

him say during the approximately

5-1/2 years that I have known hin,

which is substantially as follows:

"Keep on trusting me as you always

have, and I assure you that things

will come out O.K. an€ you will make

lots of money on your investments

through me. Let me keep on handling

matters for your benefit, as in the

past."

76 Civ. 1462 Overstreet

Same as above.

-47d-

76 Civ. 1465 Hamm

Same as above.

76 Civ. 1466 Hobe

Same as above.

/s/

Edwin F. Gordon

Sworn to and subscribed

before me this 17th day

of May, 1976.

/s/ Allen D. Gordon

Notary Public

APPENDIX "E*

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

EDWIN F. GORDON,

Plaintiff,

GEORGE A. TERRY, SR.,

et al.,

Defendants

/

EDWIN F. GORDON,

Plaintiff,

Vv. Case No. 76-8152-Civ.CA

THE ESTATE OF M. M. OVERSTREET,

et al.

Defendants

/

EDWIN F. GORDON,

Plaintiff,

v. Case No. 76-8153-Civ-CA

WILLIAM HERSEY HAMM, III,

et al.,

Defendants.

=

-2e-

EDWIN F. GORDON,

Plaintiff,

Vv. Case No. 76-8154-Civ-CA

HOBE PROPERTIES, INC.,

et al.,

Defendants.

_/

EDWIN F. GORDON,

Plaintiff,

v. Case No. 76-8155-Civ-CA

E. G. GREEN, et al.,

Defendants.

_/

AFFIDAVIT OF EDWIN F. GORDON

STATE OF FLORIDA )

COUNTY OF DADE 4

EDWIN F. GORDON, being first duly

sworn on oath, deposes and states that

he has personal knowledge of the

following facts, unless otherwise

indicated, and if called to the stand

and sworn on oath, he would be competent

to testify thereto:

-3e-

2. Affiant first met Defendant E.

G. Green on October 13, 1970. At that

time, Affiant had about one million

dollars in cash and a net worth of five

million dollars. By the time Green was

through with Affiant, Affiant's cash was

gone, he owed two-to-three million

dollars, and was committed to make ten

million dollars more in payments to

various Green investment contracts.

3. At this first meeting, Green

explained to Affiant that none of this

investors such as Affiant would have

"any relationship with each other, that

they would deal only with Green, Broberg

and the First National Bank in Palm

Beach". Green told Affiant to "leave

him alone", that he, Green, would manage

-4e-

Affiant's money and resell the

underlying tracts that he had selected

in less than two years to developers or

other syndicates at large profits.

4. Green told Affiant that he was

able to make this promise since, he,

Green, was an expert in the areas where

the lands that he selected were located,

and that because of his expertise and

contacts he, Green, was able to assure

Affiant that the underlying tracts that

he had selected would be resold by him

within two years at large profits.

5. Green also explained that his

team of money managers consisted of the

First National Bank in Palm Beach, which

would act as trustee, and Attorney

Gustave T. Broberg, who would prepare

-5e-

the documents, and along with the First

National Bank in Palm Beach and Green,

would help manage the properties and

help resell them.

6. Affiant did not receive any of

the trust documents until long after he

had made his initial decision to invest

and he invested thousands of dollars in

each investment contract.

7. Affiant was not aware that any

trust documents provided for majority

beneficiary control of the investment

contracts until litigation threatened.

8. Affiant was never consulted

about the operation or management of his

money by anyone. Affiant placed his

entire reliance on Green, Broberg and

the First National Bank in Palm Beach to

af@0

select the right properties, manage the

properties, and resell them at large

profits.

9. In investing approximately $4.3

million dollars in the investment

contracts sued upon in these cases,

Affiant relied solely upon the expertise

of Green, the First National Bank in

Palm Beach, and Broberg, to select the

right properties, and their represented

ability to resell the properties they

selected at substantial profits through

their intimate knowledge of the area in

which the properties were locaced, and

their contacts with developers and other

persons dealing in investment-type

tracts.

-7e-

FURTHER, AFFIANT SAYETH NOT.

{s/

EDWIN F. GORDON

Subscribed to and sworn

to before me, this 26th

day of April, 1980

/s/ John W. Kern

Notary Public, State of Florida

At Large

APPENDIX “F*

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

EDWIN F. GORDON,

CASE NOS. 76-8151-Civ-CA

Plaintiff, 76-8152-Civ-CA

v. 76-8153-Civ-CA

GEORGE A. TERRY, SR., 76-8154-Civ-CA

et al, 76-8155-Civ-CA

Defendants.

STATE OF FLORIDA

COUNTY OF DADE

PLAINTIFF'S AFFIDAVIT

Plaintiff EDWIN F. GORDON, being

first duly sworn on oath, deposes and

states that he has personal knowledge of

the following facts, unless otherwise

indicated, and if called to the stand

@2fo

and sworn on oath he would be competent

to testify thereto:

1. Affiant has read the statements

contained in his Third Amended

Complaints in these cases and believes

that they are true and correct and

adopts them.

2. I did not purchase any interest

in real estate. Due to the trust nature

and the limited partnership nature of

these syndicates, and the forfeiture

provisions, I did not purchase any

interest in the real estate. Attached

and made part hereof is a copy of

Defendant Gustave T. Broberg, Jr.'s (the

architect of the syndicates) letter of

October 3, 1971, to T. T. Oughterson,

Esq. which confirms this. Mr. Brogerg

states in part:

-3f-

"In many instances where

participants have died, we have

always thought his interest to be of

an intangible nature much like the

ownership of a share Of Stock Or a

participant in any trust. TI do not

think the State of Florida is

involved since the participants do

not, in fact own any interest in

real property.” (Emphasis added. )

As Mr. Broberg states, my interest in

these syndicates was like that of a

share of stock. Due to the nature of

these syndicates, i.e., trusts and

limited partnership, which contain

forfeiture provisions, neither I nor any

other participant had any interest in

the underlying properties and due to the

forfeiture provisions neither I nor any

other participant obtained anything

until either all payments were made or

the underlying properties were resold.

Every payment I made was a deduction

from my net worth. I had no equity in

any of these properties.

-4f-

3. I granted Defendant Green a

discretionary account to manage my

capital. I was not to and did not

participate or have or exercise any

control over the selection of the lands

purchased by Green, the management of

the lands, or the resale of the lands,

or any other phase of the operation of

the syndicates. Defendant Green told me

that he would select the lands, that his

Heminway Corporation would buy the

lands, that he would manage the lands,

and that he would resell the lands

without any participation from me and

that I should not interfere in any form

or fashion in Green's selection of the

lands, management of the lands or resale

of the lands. My role was limited

solely to making payments. I never read

any of the trust documents until long

after I

-5f-

made my decision to invest and as far as

I am concerned, the trust documents

formed no part of the deal.

4. My profits were not to come from

appreciation but from Green's expert

ability to find bargains and a unique

ability to find repurchasers at

favorable prices. Green's abilities and

efforts were the quintessence of my

investment. Without Green's unique

abilities and efforts, the bargain lands

could not have been found, nor the

high-price repurchasers be located.

What Green represented to me and what I

thought I was buying was his unique

expertise to select bargain-priced lands

which he could tie up for minimum

downpayments and which he could resell

to buyers whom only he knew of for far

higher prices. My investments with

ee

-6f-

Green were not appreciation deals but

rather investments in a common

enterprise where my profits would be

derived solely from the efforts and

expertise of Green and his team of

Broberg and the First National Bank in

Palm Beach of leveraging my capital

without any participation on my part

into large profits for me, as well as my

co-investors. My only function was to |

supply the capital. Had I been looking

for appreciation due to inflation or

other external or exogenous factors, I

would have selected the properties

myself and purchased them outright

myself, without having anything to do

with Green and his team. It was because

Green represented to me that due to his

unique abilities and expertise he could

find huge bargain-priced lands and

-7f-

resell them to high-priced repurchasers

without any assistance or interference

from me, that only through Green could I

participate in highly leveraged deals

with his stable of wealthy, big-name

investors, including Henry Ford II and

the Pillsburys, that otherwise would not

be available to me, that persuaded me to

turn my funds over to Green and his

team. . « «

7. %I was never furnished with any

_ prospectuses or any copies of any

registration statements, or provided

with any information whatsoever about

the properties. I relied entirely on

Green to make the decisions as to what

to buy and from whom to buy it, what

price to pay and when to sell, to whom

to sell and at what price. I knew

nothing whatsoever about the

-8f-

properties. I never saw the lands.

Indeed, Green told me that I was not

allowed to see them... .

ll. Green said that he used the

First National Bank in Palm Beach as

trustee for the syndicates which,

together with Gustave T. Broberg, Jr.,

performed the bookwork, managed the

properties and looked after the

interests of the investors. Green also

said that the trust vehicle that he used

kept the identity of his wealthy

investors secret. ...

15. I believed Mr. Green's

statements. I trusted him completely,

as well as his team of Gustave T.

Broberg, Jr. and the First National Bank

in Palm Beach. The president of The

First National Bank in Palm Beach,

William K. deVeer, repeatedly told me

2.

-9f-

what a brilliant fellow Green was, how

fortunate I was to be one of his

investors, which was also confirmed by

the attorney Green selected to represent

me in these transactions, Gustave T.

Broberg.

16. Relying upon Green's

representations and those of Gustave T.

Broberg, Jr. and the First National Bank

in Palm Beach, I turned over one million

dollars in cash to be invested by Green

and his money management team at his

discretion. My initial one million

dollar investment grew to a total

investment of $4.3 million dollars,

which was paid to Green, the First

National Bank in Palm Beach and Broberg,

in more than 100 payments, from the

years 1971 through 1976, to be invested

at their discretion. For these payments

-10f-

I have received absolutely nothing to

date. I did not purchase any interest

whacsoever in real estate. ...

19. Green managed to embark me on

Syndicates which, had I made all the

payments called for until the syndicates

were paid in full, I would have paid out

approximately ten million dollars in

payments, approximately double my net

worth of five million dollars at that

time, which was well known to Green, the

First National Bank in Palm Beach and

Gustave T. Broberg, Ire, when they set

me on this course.

20. Throughout the course of my

payments to Green, Broberg and the First

National Bank in Palm Beach, I was

repeatedly promised by Green, Broberg

and the First National Bank in Paim

Beach that they were effectuating

-llf-

resales, that they were finding buyers,

that the deals were in the fire, that I

only had one more payment to make and

that they would make me rich. In fact,

they even arranged a loan for me at the

First National Bank in Palm Beach, in

excess of half a million dollars, so

that I could make further payments. ..

FURTHER, AFFIANT SAYETH NOT.

EDWIN F. GORDON

Subscribed and sworn to

before me, this 2lst day

of July, 1980.

Notary Public, State of

Florida At Large

APPENDIX "°G*

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

EDWIN F. GORDON,

CASE NOS. 76-8151-Civ-CA

Plaintiff, 76-8152-Civ-CA

v. 76-8153-Civ-CA

GEORGE A. TERRY, SR., 76-8154-Civ-CA

et al, 76-8155-Civ-CA

Defendants.

STATE OF FLORIDA

COUNTY OF DADE

PLAINTIFF EDWIN F. GORDON'S

SUPPLEMENTAL AFFIDAVIT

-29-

Plaintiff Edwin F. Gordon files this

Supplemental Affidavit pursuant to the

Court's suggestion of July 25, 1980, and

being first duly sworn on oath, deposes

and states that he has personal

knowledge of the following facts, and

that if he were called upon his oath and

sworn in open court he would be

competent to testify to the trust in the

matters herein stated:

1. Having heard the Court's inquiry

as to factual matters which would

distinquish my investments from ordinary

real estate transactions and which show

that they were security investments, and

reviewed the same as well as the

documentation with my counsel, the

4

-3g-

following factors which are summarized

below indicate that I bought a security:

b. No checks were ever delivered by

me at a closing to the sellers when the

title to real estate passed. My checks

were all made to Green, Broberg or the

First National Bank in Palm Beach in

return for my security interest in the

syndicates,

c. At no time was any allocation of

any of the blocks of real estate made to

me or recorded in my name. I owned no

title, legal or equitable, in any real

estate.

qd. .. . I did not select any of

the properties nor did I see them. ...

f. My profits were not to come from

appreciation but as Green promised from

-4g-

development of the lands by a member of

his pool of developers which he had

already lined up who would repurchase

the lands from us at a high multiple.

g. Green said I was not to have any

control over the management of the

Syndicates. ...

h. The trust agreements were not

furnished me until long after I had made

my decision to invest and had invested

hundreds of thousands of dollars, they

furnished no part of the representations

that led me to invest... .

16. Illustrative of Green's manner

of operation was the Overstreet

syndicate. I first met Green on October

13, 1970, at which time he made the

representations that I have stated,

which apply to all of my investments at

-5g-

that time. Green persuaded me to

purchase a 10% interest in his

Overstreet syndicate. Attached are

copies of the following documents which

I was furnished with respect to my

Overstreet investment: ...

e. Broberg's letter of February 24,

1971, to me, which states in part: ...

f. Broberg's letter to the

participants in the Overstreet syndicate

of March 1, 1971, advising me: ...

g. Broberg's letter of March 5,

1971, to me, the third page of which

refers to "the enclosed Trust

Agreement", that I was to sign on page 8.

In his lengthy letter of March 5,

1971, Broberg makes no explanation of

the trust agreement or any control I as

a beneficiary was supposed to have over

-69-

the operation of the trust nor does he

make any reference to the tontine

penalty type forfeiture provision.

Broberg does not even suggest that I

read the trust agreement. In fact, I

did not read it until long after I

Signed it. ...

17. It was not until five months

after I made my decision to invest in

the Overstreet synidicate that I signed

the Overstreet trust agreement on or

about March 23, 1971. I did not read

the trust agreement before or at the

time I signed it and the trust agreement

formed no part of my decision to invest

in the Overstreet syndicate. By the

time I signed the Overstreet trust

agreement, I had already invested

$125,000 in the Overstreet syndicate,

-7g-

The trust agreement furnished no part of

the representations that had led me to

invest in the Overstreet syndicate.

FURTHER, AFFIANT SAYETH NOT.

fof

EDWIN F. GORDON

Subscribed and sworn to

before me this 30th day

of July, 1980

/s/ John W. Keen

Notary Public, State of Florida

At Large

ee ee

APPENDIX "H*

§ 771. Civil liabilities arising in

connection with prospectuses

and communications

Any person who--

(1) offers or sells a security in

violation of section 77e of this title,

OF . « «

shall be liable to the person purchasing

such security from him, who may sue

either at law or in equity in any court

of competent jurisdiction, to recover

the consideration paid for such security

with interest thereon, less the amount

of any income received thereon, upon the

tender of such security, or for damages

if he no longer owns the security.

APPENDIX “*I*

§ 77q. Fraudulent interstate

transactions

(a) It shall be unlawful for any

person in the offer or sale of any

securities by the use of any means or

instruments of transportation or

communication in interstate commerce or

by the use of the mails, directly or

indirectly--

(1) to employ any device, scheme,

or artiface to defraud, or

(2) to obtain money or property by

means of any untrue statement of a

material fact or any omission to state a

material fact necessary in order to make

Coe. oe

i

2i

statements made, in the light of the

circumstances under which they were

made, not misleading, or

(3) to engage in any transaction,

practice, or course of business which

operates or would operate as a fraud or

deceit upon the purchaser.

a

APPENDIX *°J*

§ 783. Manipulative and deceptive

devices

-It shall be unlawful for any person,

directly or indirectly, by the use of

any means or instrumentality of

interstate commerce or of the mails, or

of any facility of any national

securities exchange--

(a) To effect a short sale, or to

use or employ any stop-loss order in

connection with the purchase or sale, of

any security registered on a national

securities exchange, in contravention of

such rules and regulations as the

Commission may prescribe as necessary or

23

appropriate in the public interest or

for the protection of investors.

(b) To use or employ, in connection

with the purchase or sale of any

security registered on a national

securities exchange or any security not

so registered, any manipulative or

deceptive device or contrivance in

contravention of such rules and

regulations as the Commission may

prescribe as necessary or appropriate in

the public interest or for the

protection of investors.

APPENDIX *K*

17 C.F.R. § 240.

Rule 10b-5. Employment of Manipulative

and Deceptive Devices

It shall be unlawful for any person,

directly or indirectly, by the use of

any means or instrumentality of

interstate commerce, or of the mails, cr

of any facility of any national

securities exchange,

(1) to employ any device, scheme,

or artiface to defraud,

(2) to make any untrue statement of

a material fact or to omit to state a

material fact necessary in order to make

the statements made, in light of the

circumstances under which they were

made, not misleading, or

2k

(3) to engage in any act, practice,

or course of business which operates or

would operate as a fraud or deceit upon

any person,

in connection with the purchase or sale

of any security.