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GARRETTO v. ELITE ADVISORY SERVS.

May 22, 1992

MARIO GARRETTO, M.D., and DIGESTIVE DISEASE CONSULTANTS, S.C., Plaintiffs,
v.
ELITE ADVISORY SERVICES, INC., and ROBERT D. TOMLINSON, Defendants.


ROVNER


The opinion of the court was delivered by: ILANA DIAMOND ROVNER

MEMORANDUM OPINION AND ORDER

 I. INTRODUCTION

 II. FACTS

 On May 7, 1991, plaintiffs filed a complaint asserting that they are entitled to return of their investment in Elite Properties, plus interest and attorneys' fees, due to the defendants' solicitation and sale of securities to plaintiff in Wisconsin without a license as required by Wis. Stat. §§ 551.31(1) and 551.31(3). *fn2" Section 551.31(1) provides that "it is unlawful for any person to transact business in [Wisconsin] as a broker-dealer or agent unless so licensed . . ." by the state of Wisconsin. Similarly, Section 551.31(3) provides that "it is unlawful for any person to transact business in [Wisconsin] as an investment adviser unless so licensed or licensed as a broker-dealer . . . ." Wis. Stat. § 551.31(3). Section 551.59(1)(a) further provides:

 Any person who offers or sells a security in violation of s. . . . 551.31 . . . is liable to the person purchasing the security from him or her. The person purchasing the security may sue . . . to recover the consideration paid for the security, together with interest at the legal rate under s. 8.04 from the date of payment, and reasonable attorney fees . . . .

 Wis. Stat. § 551.59(1)(a). *fn3"

 Plaintiffs allege that on February 18, 1988, Elite Advisory contracted with Garretto to provide financial planning and advisory services. (See Complaint P 6.) *fn4" Plaintiffs further allege that this contract, denominated as a Financial Planning Agreement, ultimately resulted in the solicitation and sale of securities by defendants to plaintiffs. (Complaint PP 8-15.) Because defendants were not licensed as broker-dealers or as investment advisers in Wisconsin, plaintiffs contend that they are entitled to the return of the moneys they invested.

 Plaintiffs have now moved for summary judgment against defendants. Plaintiffs argue that because there are no genuine issues of material fact with respect to their investment with defendants, they are entitled to judgment as a matter of law based upon the facts presently before the Court. These facts are summarized below.

 A. Undisputed Background Facts

 Plaintiffs and defendants agree that Garretto was a Wisconsin resident at all times material to this action. (Elite Answer P 1; Tomlinson Answer P 1); Defendants' Response to Plaintiffs' Statement of Facts ("Def. 12(n)") P 1.) *fn5" The parties also agree that Digestive Disease Consultants, S.C. ("Digestive") is a Wisconsin Corporation with its principal place of business in Kenosha, Wisconsin. (Elite Answer P 2; Tomlinson Answer P 2; Def. 12(n) P 2.) Garretto is a 50% shareholder in Digestive. (Elite Answer P 3; Tomlinson Answer P 3; Def. 12(n) P 2.)

 The parties further agree that Tomlinson is the president and sole shareholder of Elite Advisory, an Illinois Corporation. (Def. 12(n) P 7; see Elite Answer P 5 and Tomlinson Answer P 5.) The principal business of Elite Advisory is rendering financial services to the public, and, as Tomlinson testified at his deposition, acting as an "investment advisor providing counseling services and financial strategies to help fulfill [the] client's objectives." (Tomlinson Dep. Tr. at 23-24; Def. 12(n) P 7; Elite Answer P 5; Tomlinson Answer P 5.)

 B. Undisputed Facts Relating to Sale of Securities in Wisconsin

 The parties agree that Tomlinson and Garretto met in Illinois in 1986 to discuss whether Garretto was interested in using Tomlinson's financial planning services. (Def. 12(n) P 4.) *fn6" Later, in January of 1988, Tomlinson and Garretto spoke by telephone. (Def. 12(n) P 3; Plaintiffs' Exhibit 1.) *fn7" This conversation was confirmed by letter dated February 1, 1988. (Def. 12(n) P 5; Plaintiffs' Exhibit 1.)

 Tomlinson and Garretto met again on or about February 18, 1988 at Tomlinson's offices in Schaumburg, Illinois. (Def. 12(n) P 8.) At this meeting, Tomlinson discussed with Garretto various investment vehicles for Garretto's money. (Def. 12(n) P 13.) The parties agree that during the meeting, Garretto executed both the Financial Planning Agreement with Elite Advisory *fn8" and a commitment letter which required a deposit of $ 50,000 for use in a real estate syndicate to be formed by Elite Financial Services, Inc. ("Elite Financial"). (Def. 12(n) PP 12, 14.) *fn9" At this time, Garretto paid the first $ 2,000 of a total of $ 4,000 due to Elite Advisory under the Financial Planning Agreement for its services. (Def. 12(n) P 12.)

 Pursuant to the Financial Planning Agreement, Elite Advisory agreed to "provide financial planning and other services . . . to the Client for a period of one (1) year . . . ." (Def. Exhibit 7, P A.) Among the services which Elite Advisory agreed to provide was the preparation of "a financial plan (the "Plan") consisting of a written evaluation and analysis of the information provided by the Client and recommendations for a personalized financial program . . . ." (Def. Exhibit 7, P A(2)) (Emphasis supplied.) In return, Garretto agreed to pay Elite Advisory for the services provided. (Id. P M and p. 5.) Both Tomlinson and Garretto signed this agreement. (Id. at 4, 5.)

 Following the February 18, 1988 meeting, plaintiffs and defendants continued to communicate with each other regarding the investment opportunities open to Garretto. The parties agree that Garretto gave defendants two checks totalling $ 50,000; receipt of these checks was confirmed in a letter dated March 10, 1988 sent to Garretto in Kenosha, Wisconsin. (Def. 12(n) PP 15, 16; Def. Exhibit 16.) *fn10" The parties also agree that there were numerous telephone calls between Tomlinson and Garretto in the months following the February 18 meeting for the purpose of completing Garretto's financial plan. (Def. 12(n) P 18.) In addition, defendants sent at least thirteen letters to Garretto at his Kenosha, Wisconsin address. (Pl. Exhibits 12, 14, 16, 17, 18, 19, 22, 23, 24, 25, 28; Def. 12(n) P 19.) *fn11" Each of these letters was addressed to Garretto at his Kenosha residence, and Garretto confirms that he received them all at this address. (Pl. Reply Mem., Affidavit of Mario Garretto, PP 2, 3.) *fn12"

 We are planning to close on this transaction, tentatively, May 13, 1988. If you have not already received a telephone call from me, I will be contacting you to discuss the financial demographics of this investment. I would like to review with you the logic of the acquisition and the mechanics that must be completed with you to effectively participate as an investor.

 Since we are anticipating the real estate closing on May 13, 1988, we will be sending you a confidential private placement memorandum along with a subscription agreement which you will need to sign and return to us. It is most ...


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