The opinion of the court was delivered by: HUYETT
Defendants, William L. Parkinson, D.D.S. and Parkinson Pension Trust (collectively, "Parkinson Defendants") have filed a Motion to Dismiss on the grounds that plaintiffs' Complaint is untimely and fails to state a claim.
The other defendants, Russell M. Dimmick, E. Wayne Pocius, Unique Garden Center Co. and Van Pines of PA, (collectively, "Unique Defendants") have joined in the Parkinson Defendants' Motion and filed separate Motions to Dismiss presenting their own arguments in favor of dismissal.
For the reasons that follow, The Parkinson Defendants' Motion will be GRANTED and the Complaint will be dismissed. In light of the disposition of the Parkinson Defendants' Motion, the Court does not reach the issues presented in the Unique Defendants' Motions and they are therefore denied as moot.
For the purposes of ruling on the instant Motion to Dismiss, the Court accepts as true the following facts. See, Rocks v. Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989).
Defendants, the promoters, managers and financiers of Evergreen Valley Nurseries Limited Partnership ("Evergreen") organized Evergreen in order to acquire 747 acres of nursery stock consisting of 950,000 evergreen trees growing on two properties (called "Raven Valley" and "Tioga Co."). Unique Garden Center ("Unique") is the general partner of Evergreen. Pocius and Dimmick are Unique's sole shareholders. Pocius and Dimmick are also the general partners of Van Pines of PA ("Van Pines"). Dr. Parkinson is the sole trustee of Parkinson Pension Trust ("Trust"), a tax-qualified retirement plan.
Plaintiffs, some 26 investors, bought units in Evergreen for cash, subscription notes and investor notes. The investor-plaintiffs claim they were defrauded by the defendants who inflated the value of the nursery stock by engaging in a series of self-dealing transactions.
In July of 1986, the Trust, at the direction of Dr. Parkinson, purchased the Raven Valley nursery stock from Van Pines and its general partners for approximately $ 3.6 million. The Trust also purchased the Tioga Co. nursery stock from Pocius and Dimmick for approximately $ 600,000.
After obtaining the nursery stock, the defendants agreed that Evergreen would purchase the Trust's nursery stock for the inflated price of $ 11.2 million. The entire price of the nursery stock was financed by a $ 13,500,000 offering of Evergreen units pursuant to a private placement memorandum. The plaintiff-investors paid $ 150,000 per unit consisting of a $ 70,000 cash payment, a $ 9,500 subscription note and a $ 70,500 investor note, due July 1996. When the offering was consummated, the Trust received approximately $ 4.5 million in cash and $ 6.2 million in notes from Evergreen, all for nursery stock originally purchased by the Trust for about $ 4.2 million.
The private placement memorandum failed to disclose the amounts the Trust actually paid for the nursery stock and omitted to mention, among other things, the self-dealing surrounding the Raven Valley and Tioga purchases and the nursery stock's inflated value.
In 1993, the IRS and Evergreen entered into a Closing Agreement in which Evergreen admitted that the original amount set for the value of the nursery stock was false and that the true value of the nursery stock (for income tax purposes in 1986) was $ 7,150,000. Plaintiffs obtained a copy of the closing agreement between the IRS and Evergreen on October 11, 1993.
Because of the Trust's expressed intent to collect on the investor notes in July of 1996, plaintiffs filed the instant Complaint on November 16, 1995 -- more than 2 years after receiving the Closing Agreement.
The Complaint is framed in four counts. Counts I-III seek a declaration that the investor notes are void and unenforceable because they were procured by fraud. Count I requests declaratory relief under Section 29(b) of the Securities and Exchange Act of 1934 ("'34 Act"). Count II seeks declaratory and rescissory relief pursuant to Section 508 of the Pennsylvania Securities Act ("PSA"). Count III demands declaratory relief based upon common law fraudulent inducement. Count IV alleges that ...