APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND
K. BERG, Judge, presiding.
MR. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:
Rehearing denied January 25, 1979.
Plaintiffs, purchasers of unimproved real property in Lucaya, Grand Bahama Island, appeal the trial court's dismissal of three counts of their four-count complaint for failure to state a cause of action under either the Illinois Securities Law of 1953 (Ill. Rev. Stat. 1975, ch. 121 1/2, par. 137.1 et seq.) or under the Securities Act of 1933 (15 U.S.C. § 77a et seq. (1976)). The fourth count of the complaint involved a violation of the Interstate Sales Act (15 U.S.C. § 1709 (1976)). That count is not involved in this appeal. The sole issue raised is whether plaintiffs' complaint states a violation of either the Illinois or Federal securities laws. We reverse and remand.
• 1 The dismissal in this case was granted in response to defendants' motion to dismiss for failure to state a cause of action. *fn1 Under the rules of pleading in Illinois, the motion to dismiss for failure to state a cause of action is a section 45 motion. (Ill. Rev. Stat. 1975, ch. 110, par. 45.) A section 45 motion attacks the legal sufficiency of the complaint. In considering a section 45 motion, a court considers only the allegations made in the complaint and exhibits attached thereto. A section 45 motion should be granted only if "it appears that no set of facts could be proven under the pleadings which would entitle plaintiff[s] to relief." (Huebner v. Hunter Packing Co. (1978), 59 Ill. App.3d 563, 565, 375 N.E.2d 873, 875.) Therefore, it is our task to look to plaintiffs' pleadings and determine whether any set of facts could be proven under the pleadings which would entitle them to relief.
The plaintiffs, all residents of Illinois, include named plaintiffs and other members of a class of individuals who were sold interests in unimproved property in Lucaya, Grand Bahama Island (Lucaya Development) by the defendants. The interests were evidenced by land installment contracts. Defendants include: (1) The Grand Bahama Development Company, Limited (Development Company), the owner and developer of the real property, (2) American Devco., Incorporated (Devco), the holding company for the United States operations of Development Company, (3) Bahama Realty Corporation (Bahama), the holder of the exclusive sales rights in the United States for property in the development, (4) American International Realty Corporation, the exclusive franchisee or agent of Bahama for the sale in Illinois of development property, and (5) Intercontinental Diversified Corporation, the parent or related corporation of Development Company, Bahama, and Devco. Plaintiffs allege that the sales of the interests, as represented by the total promotional and selling efforts of defendants, represent more than sales of unimproved real estate. They contend that each sale constituted the sale of an investment contract, which is a security under both Illinois and Federal Securities Laws, and as such required compliance with the appropriate securities law.
Count I states a violation of the registration requirements of the Illinois Securities Law of 1953. (Ill. Rev. Stat. 1975, ch. 121 1/2, par. 137.5.) In this count, plaintiffs set forth the basic allegations of their complaint in a section entitled The Investment Scheme. They allege that defendant, Development Company, by or through itself, its parent, subsidiary or affiliate corporations, acquired substantially all of the land in the Lucaya area on Grand Bahama Island and developed it in accordance with a Master Plan (Plan). This Plan called for the construction of facilities desirable for a complete community, including roads, utilities, schools, recreational facilities, parks, greenways, churches, waterways, water reserves, beaches, marinas, golf courses, shopping complexes, and resort hotels, in or near the Lucaya Development. Plaintiffs contend that this Plan has been followed from the time of its preparation to the time of this complaint.
They next allege that in mid-1960, defendants instituted an extensive advertising and promotional campaign aimed "at any prospective market, and particularly at purchasers, of such land for investment purposes only." Paragraph 16 of plaintiffs' complaint contains extensive samplings of the investment-orientation of the promotional and advertising materials. Also, plaintiffs attached copies of a number of the purchase forms used in the sales. Some of these forms contained boxes for an indication of whether the interest in the property was being purchased for investment or residential purposes.
The last paragraph of the allegations setting forth The Investment Scheme makes it clear that plaintiffs could not, nor were they expected to do anything to increase the value of their investment. It alleged that:
"* * * land purchased by investors `to hold for the future' would become invaluable and salable for tourists, persons who were in the business of constructing housing, particularly multi-family and high-rise types of housing, and businesses on Grand Bahama Island, solely by virtue of the development, advertising and promotion of the Island and of the Lucaya Development by Development Company, its parent, subsidiary or affiliate corporations, adherence to the Master Plan, and consequent increase in tourism, permanent residents and businesses." (Emphasis added.)
Count II repeats the basic allegations made in count I and states a violation of the registration requirements of the Securities Act of 1933 (15 U.S.C. § 77f (1976)). Count III states a violation of the antifraud provisions of the Federal Securities Act (15 U.S.C. §§ 77q and 77w (1976)). In addition to the basic allegations made in count I, count III alleges that defendants made, participated in making, or approved of certain representations, including:
"(b) The property in the Lucaya Development would increase in value;
(c) Investors would be able to sell their investment contracts at a profit or `trade-up' to more valuable property;
(d) Other people had made substantial profits on their investments in the Lucaya Development;
(e) Development Company's efforts, by or through itself, its parent, subsidiary or affiliate corporations, would result in the Lucaya Development increasing in value ...