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May 6, 1985


The opinion of the court was delivered by: Nordberg, District Judge.



Plaintiffs have sued numerous defendants under section 10(b) of the Securities Exchange Act of 1934 ("1934 Act), 15 U.S.C. § 78j, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240; Section 17 of the Securities Act of 1933 ("1933 Act"), 15 U.S.C. § 77q, Section 12 of the 1933 Act, 15 U.S.C. § 77i; and sections 1406, 1408 and 1410 of the Interstate Land Sales Full Disclosure Act ("ILSFDA") 15 U.S.C. § 1705, 1707 and 1709. Plaintiffs allege that defendants operated a real estate fraud scheme by making misrepresentations and omissions to deceive plaintiffs into purchasing and making a series of payments on land located in Colorado City, Colorado.

In the mid-1960's, Colorado City was developed by the Colorado City Development Company ("CCDC"). In 1969, CCDC was purchased by Great Western United Corp. ("GWU"). Five years later, in November, 1974, defendants N.B. Hunt and W.H. Hunt each purchased approximately 30% shares of GWU and became members of the Board of Directors of GWU. In February, 1978, HIRCO acquired all of the stock of GWU.

The five plaintiffs in this case are all purchasers of property at Colorado City. It is undisputed that each of the land sales to these plaintiffs took place before February 1, 1969, over 6 years before the Hunts acquired their GWU stock. The two lots purchased by the Kaliskis and the three lots purchased by the plaintiff Carole Kovich were fully paid and deeded prior to 1974. The two lots of the two remaining plaintiffs, the Housers, were fully paid and deeded as of October, 1976 and March, 1978.

In their motion for partial summary judgment, the Hunt defendants and HIRCO ask for judgment on all claims relating to contracts entered or payments made prior to November, 1977 for the Hunt defendants, and prior to February, 1978 for HIRCO. Defendants essentially assert that they cannot be held liable for acts committed before they had any interest in or control over the Great Western Companies.


On a motion for summary judgment, the moving party has the burden of establishing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Cedillo v. International Association of Bridge and Structural Iron Workers, 603 F.2d 7, 10 (7th Cir. 1979). The nonmoving party is entitled to all reasonable inferences that can be made in its favor. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). However, a plaintiff may not merely rely on conclusory pleadings to withstand summary judgment. In responding to a motion for summary judgment, a plaintiff must set forth specific facts in affidavits or otherwise showing that there are genuine issues that must be decided at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Posey v. Skyline Corp., 702 F.2d 102, 105 (7th Cir. 1983).

The purpose of the summary judgment procedure is to eliminate a trial in cases where a trial is unnecessary and results in delay and expense. Mintz v. Mathers Fund, Inc., 463 F.2d 495, 498 (7th Cir. 1972). As the Seventh Circuit Court of Appeals has noted, with the ever-increasing burden upon the judiciary, persuasive reasons exist for the utilization of summary judgment procedures whenever possible. Kirk v. Home Indemnity Co., 431 F.2d 554, 559-60 (7th Cir. 1970). Courts therefore will not strain to find the existence of a genuine issue where none exists. Id.

Securities Law CLaims

As defendants point out, it is well established that a person may not be held liable as a control person for acts occurring before that person took control. See, e.g., Sennott v. Rodman & Renshaw, 474 F.2d 32 (7th Cir. 1973), cert. denied, 414 U.S. 926, 94 S.Ct. 224, 38 L.Ed.2d 160 (1973). Plaintiffs do not contest this point. Instead, they assert that these defendants are liable for acts performed before they acquired their interest in GWC as aiders and abettors and co-conspirators.

First, plaintiffs assert that the Hunt defendants are liable as aiders and abettors for all acts of the alleged scheme to defraud. They argue that, since under federal criminal law, aiders and abettors are punished as principals, by analogy, one who aids and abets a civil securities violation is also liable for all the acts of other participants in the scheme, even if those acts occurred before the defendant entered the scheme. Plaintiffs cite no authority for this proposition, and no authority has been uncovered by the court. To the contrary, courts have held that a person may not ...

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