Court Opinion

ID: 9576490
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:25:11.974327+00
Date Added: 2024-06-11T13:08:44.710984
License: Public Domain

Hill, Justice,
dissenting.
The majority opinion finds that a certificate of indebtedness issued by an established non-profit corporation (a country club) is not a security within the meaning of the state securities law where the investor has no expectation of financial return (profits). But what about the investor’s expectation of return of his investment (capital)? The majority point out that the investors here do not expect any financial advantage. But do they expect financial disadvantage?
The last investors to seek return of their investment here could well be losers as in a typical pyramid scheme. To demonstrate this conclusion, I take the liberty of quoting from the trial judge’s order: "The funds received from the sale of certificates are to be used in two ways. First, at least $50,000.00 is to be kept in trust for the purpose of redeeming certificates. Second, trust funds in excess of $75,000.00 are to be used for retirement of short term and long term debt, capital improvements, and master plan and long range capital improvement *243studies.” The capital improvements include purchasing electric golf carts, painting the clubhouse, replacing worn carpets, repairing the clubhouse roof, repairing tennis courts, etc.
"If the funds in the trust prove insufficient to pay certificates presented for redemption, then redemption is to take place on a first-come, first-served basis. Upon liquidation of Dunwoody, certificates are to be redeemed pro rata after the payment of taxes and debts. . .
"The instant case bears resemblance to Blau v. Redmond, 143 Ga. App. 897 (1977). The issuer is a non-profit corporation. The instrument issued is a redeemable certificate which affiliates (present and prospective, in the case at bar) are required to buy. One purpose of the issue is to raise money for capital improvements, another is to retire debt. . .
"Like the parents of the prospective students in Blau, prospective members of Dunwoody must make an 'investment’ decision — whether to join the club and provide capital through the redeemable certificate plan, in expectation of full redemption upon disassociation from the club. Existing members also have a significant 'investment’ decision to make — not only whether to contribute added capital, but also whether to forego their prior contributions by relinquishing their membership. Only through the common accumulation of capital envisioned by the plan will the benefits sought to be achieved (a financially healthy and up-to-date facility) materialize, so as to enable the club to succeed as a continuing business. The financial well-being of the club directly affects the redeemability of the certificates; if there are insufficient funds in the trust to redeem a certificate, holders are placed on a waiting list, and if the club is liquidated, a pro rata distribution takes place after payment of taxes and debt. Plaintiff, although a non-profit enterprise, is nevertheless subject to the same economic perils as any other business. Non-profit corporations are included within the ambit of the Georgia Securities Act. While the risks involved here may be small, there still exists the possibility that a present or prospective member, having made his 'investment’ decision based upon the prospect of receiving full redemption of his *244certificate, will be deprived of full redemption because of the club’s financial difficulty. It is for these reasons that the Court believes that the decision to take part in the redeemable certificate plan, which a present or prospective member of Dunwoody must make, is the type of decision the Securities Act was designed to encompass. Therefore, as in Blau, the redeemable certificates are 'securities’.” (Emphasis supplied.)
I would affirm the decision of the trial judge.