The full case caption appears at the
end of this opinion. Ann Meyers, individually and as the personal representative of the estate of her deceasedhusband, James R. Meyers, appeals the decision of the district court granting summary judgment infavor of Jack T. Lott and Kathleen S. Lott on the Meyers’ claims under the Idaho and FederalSecurities Acts. I.BACKGROUND AND PRIOR PROCEEDINGS This case arises from losses in excess of $300,000 suffered by Ann and James R. Meyers (theMeyers) when they invested in what turned out to be a complex check-kiting scheme known as theHansen Loan Program. James Meyers first heard about the Hansen Loan Program from Jack Lott (Lott) in the springof 1989 when Lott discussed the program on the golf course with friends. There is some dispute asto whether James Meyers approached Lott about investing in the program, or whether Lott initiatedthe discussions which resulted in the Meyers’ investment. In any event, James Meyers told his wifethat they should consider investing in the Hansen Loan Program. She wished to speak with Lottbefore making a decision, so a meeting was held at the Meyers’ home in October of 1989. Thismeeting lasted between an hour and a half to two hours. According to the evidence submitted on behalf of the Meyers, Lott told them that he hadpersonally invested $100,000 with a great deal of success; that former Presidents Bush and Reaganwere supporting the program; that the Meyers would be members of the “Jack Lott Group” andwould enjoy special treatment; that ten wealthy persons from each state (Golden Eagles) had alreadyinvested over $100,000 each; that the Meyers would receive their money back within two to threedays upon request; that “George to George” (George Washington to George Bush) commemorativecoins were being marketed as part of the program, and Jerry Falwell had already purchased over250,000 sets. The Meyers testified that they made the decision to invest immediately following thismeeting with Lott. George Hansen (Hansen) contacted James Meyers following the meeting. James Meyerslater discussed his investments with both Hansen and John Scoresby (Scoresby), who acted onHansen’s behalf in many of the transactions. The Meyers had to liquidate some assets beforeinvesting, and this fact was communicated to Scoresby. On February 21, 1990, the Meyers made their initial investment of $56,000. A few weekslater, the George Hansen Loan Program (Ideal Consultants) wrote a check to Lott which was returnedfor insufficient funds. Lott did not inform the Meyers that this check was returned. Between Marchand August of 1990, the Meyers made approximately $350,000 worth of loans to the Hansen LoanProgram. The loan program ended when Hansen declared bankruptcy on October 31, 1990. A yearlater, on November 2, 1991, Hansen and Scoresby met with the investors who had lost their money.Lott says that it was clear at the meeting that the money would not be returned to the investors. TheMeyers held out hopes of recouping their losses based upon representations made by Hansen. The Meyers filed a complaint on February 22, 1993, alleging violations of the IdahoSecurities Act (Idaho Code ��30-1401 to 1459 (1999)), the Utah Uniform Securities Act (Utah CodeAnn. ��61-1-1 to 1-30 (1997)) and the Federal Securities Act of 1933 (15 U.S.C.A. �77l (1997)).Scoresby, Hansen, Ideal Consultants, and John and Sally Does were initially listed along with Jackand Kathleen Lott (Lotts); however, the Lotts are the only defendants in this case. Certain facts regarding Lott’s status as a seller of securities are subject to dispute. TheMeyers’ accounting expert, Allen Suderman (Suderman), stated that Lott was given a $1,000 finder’sfee for bringing Devon Bratsman into the Hansen Loan Program. According to Suderman, Lottreceived compensation from the Hansen Loan Program for finding other investors. Ann Meyersstated that Hansen offered her a commission for getting her father involved in the program. Hansensays that he was encouraged by the Meyers to contact Ann’s father. Other facts which may reflect on Lott’s status as a seller of securities are undisputed. Hansentold Lott that he would pay him 10% interest per month for money Lott invested; nevertheless, Lottsometimes received interest payments at rates in excess of 20%. Lott offered no direct explanationfor this, but claimed that another investor, Bud Wright, also earned 20% interest. It is not disputedthat Robert Gillespie was given finder’s fees for bringing investors into the Hansen Loan Program. The Lotts raised the affirmative defenses that they were not sellers within the meaning of theIdaho Code or the Federal Securities Act, that the court lacked jurisdiction over the Utah SecuritiesAct and that any violation of the Federal Securities Act was barred by the statute of limitations. Thedistrict court granted summary judgment in favor of the Lotts. The district court employed the”financial benefit” test articulated in Pinter v. Dahl, 486 U.S. 622 (1988). This test defines a sellerof securities as one who expects pecuniary gain as a result of his/her efforts. The district courtrejected the “substantial factor” test, urged by the Meyers, which requires only that a seller be asubstantial factor in bringing about the purchase of securities. However, the district court reasonedthat summary judgment would be appropriate even if the substantial factor test were utilized. TheMeyers moved for reconsideration, supporting the motion with a second affidavit from Ann Meyersand a second affidavit from Suderman. The district court denied the motion for reconsideration andstruck Ann Meyers’ and Suderman’s second affidavit. James Meyers died prior to the filing of thenotice of appeal. Ann Meyers appears on her own behalf and as personal representative of the estateof James Meyers. II. STANDARD OF REVIEW In reviewing a district court’s decision to grant summary judgment, this Court employs thesame standard properly employed by the district court when it originally ruled on the motion. Smithv. Meridian Joint Sch. Dist. No. 2, 128 Idaho 714, 718, 918 P.2d 583, 587 (1996). Summaryjudgment is appropriate where there is no genuine issue of material fact and the moving party isentitled to judgment as a matter of law. Idaho Rule of Civil Procedure 56(c). The district court maynot weigh the evidence to resolve controverted factual issues. R.G. Nelson, A.I.A. v. Steer, 118 Idaho409, 410, 797 P.2d 117, 118 (1990). III. THE DISTRICT COURT ERRED IN GRANTING SUMMARY JUDGMENT A. The District Court Correctly Adopted the Financial Benefit Test. The threshold question is how to define a “seller” of securities under the Idaho Securities Act.This issue has not been decided by this Court. Two tests have developed in other jurisdictions todefine the term “seller.” The “financial benefit test” was adopted by the U.S. Supreme Court inPinter v. Dahl, 486 U.S. 622 (1988), interpreting the Federal Securities Act. The “substantial factortest” has been utilized by courts in Texas, Kansas and Washington, interpreting their respective statesecurities acts. See Lutheran Brotherhood v. Kidder Peabody & Co., 829 S.W.2d 300, 306 (1992),set aside on other grounds 840 S.W.2d 384 (1992), State ex. rel. Mays v. Redenhour, 248 Kan. 919,930, 811 P.2d 1220, 1231 (1991), Hoffer v. State, 113 Wash.2d 148, 149, 776 P.2d 963, 964 (1989). The substantial factor test is a broad test which allows individuals to be classified as sellerswhen their acts are deemed to be a substantial factor in bringing about the particular securitiesviolation. The states which have utilized the substantial factor test have been motivated by a desireto protect as many investors as possible. The financial benefit test defines a seller of securities as one who is motivated by pecuniarygain. This definition extends to “the person who solicits the purchase, motivated at least in part bydesire to serve his own financial interests or those of the securities owner.” Pinter v. Dahl, 486 U.S.at 630. This Court has attempted to maintain uniformity and continuity with the Federal SecuritiesAct and has utilized federal law in interpreting the Idaho Securities Act. Frachiseur v. MountainView Irrigation Company, Inc., 100 Idaho 336, 597 P.2d 222 (1979). That approach is appropriatein this case. The financial benefit test offers courts a clear line in deciding whether an individualmeets the definition of a seller under the Idaho Securities Act, while at the same time offeringadequate protection to investors. The district court correctly adopted the financial benefit test. B. The District Court Incorrectly Found that there Was No Genuine Issue ofMaterial Fact. The district court granted summary judgment in favor of the Lotts, after concluding that nogenuine issue of material fact existed. A review of the record presented to the district court indicatesthat a genuine issue of material fact does exist. Lott received higher interest than one would expect in the investment program and receivedone check with the notation “F.F. (Bratsman)” which may be interpreted as a finder’s fee. No clearexplanation was given for the excess interest payments. It is undisputed that Robert Gillespiereceived finder’s fees for bringing investors into the Hansen Loan Program. These pieces ofevidence are not dispositive, but a reasonable inference can be drawn that the excessive interestpayments were disguised compensation to Lott for finding investors. Construing the inferences infavor of the party opposing the motion, there are sufficient questions of fact to defeat the Lotts’motion for summary judgment. IV. THE DISTRICT COURT CORRECTLY APPLIED IDAHO SECURITIES LAW Ann Meyers argues that the Utah Securities Act applies. The Utah Securities Act is foreignlaw which must be presented to the ruling court in accordance with I.R.C.P. 44(d) which providesin relevant part: If either party to an action intends to request the court to take judicial notice of thestatutes or laws of a foreign state, a brief or memorandum citing such foreign lawshall be submitted to the court and opposing counsel at least ten (10) days prior totrial or hearing. Although the Meyers mentioned the Utah Securities Act to the district court several times, Rule44(d) requires more than the simple invocation of foreign law. The intention behind this rule is toprovide judges with all relevant information when they are asked to take judicial notice of foreignlaw. At a minimum, this includes the actual text of the law. By merely referring to the Utah Securities Act, the Meyers failed to conform withrequirements of I.R.C.P. 44(d). The district court was correct in applying Idaho law. In their motionfor reconsideration, the Meyers made no attempt to supplement their pleadings with the text of theUtah Securities Act or to argue that the district court erred in failing to take judicial notice of theforeign law. The record was inadequate for the district court to consider application of the Utah law.Any claim under Utah law has been waived. V. ISSUES NOT ADDRESSED ON APPEAL The Lotts raise two issues which this Court will not address on appeal. They argue that theone year statute of limitations under the Federal Securities Act barred the Meyers’ claim and that thedistrict court erred in striking certain affidavits. This Court will not decide issues for the first time on appeal which were not sufficientlyaddressed by the district court. Cf. Pullman-Standard v. Swint, 456 U.S. 273, 291-293 (1982), Popev. Intermountain Gas Co., 103 Idaho 217, 225, 646 P.2d 988, 996 (1982). Based on its conclusionthat summary judgment was appropriate, the district court declined to address the statute oflimitations argument. Accordingly, this issue is remanded to the district court.The Lotts also argue that the district court erred in striking the supplemental affidavits of Ann Meyers and Alan Suderman. This Court need not reach this issue because the information presentedin the initial affidavits was sufficient to defeat a motion for summary judgment. VI. ATTORNEY FEES AND COSTS Both parties request attorney fees on the basis that the suit was “brought, pursued or defendedfrivolously, unreasonably or without foundation.” I.C. � 12-121. Neither party has pursued ordefended a frivolous claim on appeal. Neither party is awarded attorney fees. Balderson v.Balderson, 127 Idaho 48, 896 P.2d 956 (1995). The appellant is awarded costs on appeal. VII. CONCLUSION The district court’s grant of summary judgment is vacated and the case is remanded forfurther proceedings. Appellant is awarded costs, but not attorney fees, on appeal. Chief Justice TROUT and Justices SILAK, WALTERS and KIDWELL CONCUR.
Meyers v. Lott THE SUPREME COURT OF THE STATE OF IDAHO No. 24700 ANN T. MEYERS, individually and as personal representative of the estate of JAMES R. MEYERS, deceased, Plaintiff-Appellant, v. JACK T. LOTT and KATHLEEN S. LOTT, Defendants-Respondents, JOHN SCORESBY and MARILYNSCORESBY, husband and wife; GEORGEHANSEN, individually and d/b/a IDEALCONSULTANTS and/or GEORGE HANSENAND ASSOCIATES; and JOHN DOES andSALLY DOES 1 thru 10, Defendants. Filed: January 6, 2000 Before: Justice SCHROEDER, Chief Justice TROUT and Justices SILAK, WALTERS and KIDWELL. Appeal From: District Court of the Seventh Judicial District Counsel for Appellant: Brent W. Eames and James T. Meyers Counsel for Appellee: James D. Holman
