Opinion
Case No. C-93-20105 RMW
December 29, 1994
FINDINGS AND CONCLUSIONS
This case was tried before the undersigned on June 15, 16, 20 and 21, 1994. The court now renders its findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.
FINDINGS OF FACT Parties
1. Plaintiff Dominic A. Fanelli ("Fanelli") is a retired certified public accountant who at all times relevant was a sophisticated and experienced investor.
2. Fanelli is, and at all times relevant was, the trustee of the Fanelli Consulting Inc., Defined Benefit Pension Trust ("FCI Trustee").
3. Elliott E. Bard, Jr. ("Bard") was, or at least represented himself to be, a real estate broker and the holder of a series 22 securities license.
4. Private Investment Services, Inc. ("PISI") was a real estate loan brokerage firm incorporated on September 18, 1989. Bard was the chief executive officer and sole officer and director of the company. PISI funded secured real estate loans and sold those loans to the public often fractionalizing interests in them. Investors bought the loans or fractionalized interests therein with the hope of making a profit.
5. Beginning in May 1989 and before the formation of PISI, FCI and Fanelli, individually, invested in loans initially funded or arranged by Bard who was apparently then doing business as Private Financial Services and operating under the real brokerage license of Frank Tassielli ("Tassielli"). Beginning after September 18, 1989 the investments of FCI and Fanelli were made with Bard through PISI.
6. Defendant Cypress Capital Corporation ("Cypress") was at all times relevant a duly licensed broker-dealer of securities.
7. Defendant Theodore Wanderer ("Wanderer") was at all times relevant the chief compliance officer and owner of Cypress.
8. Bard became a registered representative with Cypress on July 26, 1989.
9. In June 1990 F.E.D. Funding ("FED"), a general partnership, was formed by Tassielli, Bard, and Fanelli — the initials F, E, and D were for the partners' first names — to invest for short terms in loans arranged by PISI. By use of a line of credit obtained by FED from Wells Fargo Bank primarily through the financial strength of Fanelli, FED was able to fund loans arranged by Bard or Tassielli with borrowers before permanent investors were found for the total amount of the loans. FED made money off of the difference between the borrowers' interest rate and the rate charged by Wells Fargo Bank on the line of credit.
10. FED made its first investment in a loan arranged through PISI on July 13, 1990.
Subject Transactions Reis Transaction
11. On February 27, 1991, PISI received a $270,000 note and second deed of trust from Reis.
12. On April 3, 1991, FED delivered $160,000 to Bard to acquire a $160,000 fractional interest in the $270,000 Reis note and deed of trust.
13. PISI, under Bard's signature, assigned to FED a $120,000 interest in the Reis note on October 15, 1991 and assigned to FED a $120,000 interest in the trust deed on October 22, 1991, leaving a $40,000 shortfall to FED.
14. Fanelli suffered the loss and obtained an assignment of FED's rights.
Fisher Transaction
15. On March 18, 1988 Fisher executed a trust deed to Park.
16. On March 7, 1991, FED delivered $125,000 to Bard to acquire the Fisher promissory note and deed of trust.
17. On March 8, 1991, Park assigned her interest in the March 18, 1988 Fisher trust deed to PISI.
18. On July 18, 1991, PISI assigned the Fisher trust deed to Reeds Sport Shop Defined Benefit Plan.
19. FED did not receive any deed of trust or assignment of the deed of trust for its Fisher investment.
20. Fanelli bore the entire FED loss and obtained an assignment of FED's rights.
AFAB Transaction
21. On December 4, 1990 AFAB Development ("AFAB") signed a note and deed of trust in favor of PISI which was recorded December 13, 1990.
22. On December 18, 1990 Fanelli delivered to Bard $100,000 drawn on the account of Fanelli and his wife, Virginia Fanelli, to invest in the AFAB note and deed of trust. PISI, acting under Bard's signature, assigned the AFAB $100,000 promissory note and deed of trust to four other persons unrelated to plaintiffs and fractionalized Fanelli's investment.
23. Bard misrepresented to Fanelli that the AFAB property was able to be developed and worth $210,000.
24. Fanelli settled with the other investors in the AFAB note for a 50% interest.
25. Fanelli and the other investors foreclosed on the AFAB property, and Fanelli acquired a 50% property interest on September 16, 1992. The property appears to be worth substantially less than it was represented by Bard to be worth.
Thormities Transaction
26. On May 15, 1991 FCI Trustee delivered and transferred to Bard $95,000 to acquire a $95,000 fractionalized interest in a $205,000 promissory note and deed of trust from Thormities.
27. On January 29, 1992 Thormities executed a $205,000 note and deed of trust in favor of PISI.
28. On February 26, 1992 PISI, under the signature of Bard, assigned $95,000 of said $205,000 Thormities note to FCI Trustee, which assignment showed the remaining $110,000 interest as having been assigned on February 25, 1992 to Joy Financial Services.
29. Unknown to FCI Trustee, PISI under Bard's signature, assigned a $135,000 interest in the $205,000 Thormities deed of trust to Joy Financial Services which assignment was recorded March 2, 1992, and shorted FCI Trustee $25,000.
30. FCI Trustee did not receive a signed or recorded Thormities trust deed assignment.
31. The Thormities note has been renegotiated so FCI Trustee now holds a $95,000 participation in a note for $230,000. The interest rate on the new loan is 10% compared to the original rate of 13.5% and the new note has a substantially longer term.
Bard's Illness and Subsequent Bankruptcy
32. Bard had a stroke in May 1992 and filed for chapter 7 bankruptcy on August 13, 1992.
33. Fanelli did not fully realize that he had been cheated by Bard until after looking into records following Bard's stroke.
Cypress' Supervision of Bard and Lack of Knowledge of "Bard's Selling Away"
34. Bard became a Cypress representative after being a representative for a securities dealer named Robert Mills. Mills represented to Wanderer that Bard was "a dream rep. [and] a super guy."
35. After Bard became a Cypress representative, Wanderer received no complaints concerning Bard's activities.
36. At the time Bard became a Cypress representative, Bard told Wanderer that the securities he had been selling were limited partnerships interests in equipment leasing limited partnerships. Wanderer also learned from Bard that he was a real estate salesperson.
37. Wanderer was aware that Bard was involved in real estate finance but believed his involvement was limited to selling property and arranging loans. Wanderer did not know that Bard was selling trust deed investments including fractionalized deeds of trust.
38. Cypress neither offered nor sold any of the notes or deeds of trust (or fractionalized interests therein) purchased by Fanelli, FCI Trustee, or FED. None of these investments was presented by Bard to Cypress or reviewed by Cypress. Cypress did not authorize Bard to engage in these transactions and did not authorize Bard to represent that he was a Cypress agent for the purposes of his real estate business generally, or these transactions specifically.
39. Neither Fanelli, FCI, FCI Trustee, nor FED had an account with Cypress or did business at any time with Cypress.
40. Cypress had no files on any of the note and deed of trust transactions between PISI and Fanelli, FCI Trustee or FED. Cypress neither received nor paid any commissions or fees for any of the transactions. Bard never told Cypress about the transactions or even showed Cypress any files pertaining to them, despite the fact that Wanderer made periodic reviews of other securities files Bard kept at his office. Bard kept his real estate files separate from his files pertaining to what he represented to be his securities transactions.
41. Bard's representative agreement with Cypress specifically prohibited Bard from engaging in securities transactions outside the regular scope of his employment without prior written permission from Cypress. Bard was also required to make his securities files available for review by Wanderer.
42. Cypress also gave Bard a compliance manual, which appears to have complied with SEC, NASD, and California Department of Corporations requirements, and which provided, among other things, that if there was any possibility that an investment product might be a security, the registered representative was required to submit the product to Cypress for review and approval prior to soliciting any sales of such product.
43. Bard realized or at least should have realized that the second deed of trust interests he was selling were securities or at least required review by Cypress. This is shown by the comments he made to Fanelli about selling investments under Cypress' umbrella. It is further supported by the fact that materials provided by Wanderer reflected concern over the sale of fractionalized deeds of trust and called for any investment that might possibly involve securities to be reviewed by Cypress before it was offered.
44. Bard signed quarterly compliance reports for Cypress during the relevant time period confirming that he had not done any "selling away," i.e. sold a security without Cypress' authorization. Bard also attended a compliance meeting at Cypress' office on February 5, 1992 at which time the prohibition against "selling away" was probably discussed.
Factors Leading to Plaintiffs' Investments
45. Fanelli individually, or as FCI Trustee, initially invested with Bard to obtain higher short term yields than he had been getting from certificates of deposit. Bard told Fanelli that he, Bard, could sell any notes, or fractionalized interests therein, that were purchased by Fanelli in a six to nine month time frame, if Fanelli desired.
46. Bard telephoned, communicated by facsimile or mailed from PISI to Fanelli information on available trust deed investments.
47. When Fanelli, in any of his capacities, made an investment with Bard, the check was made payable to PISI and mailed to Bard. Bard would give a receipt, assign the note to Fanelli (or FCI Trustee or FED) and record the deed of trust. The borrower would have initially executed a note and deed of trust in favor of PISI and then PISI would assign the appropriate interest to Fanelli (or FCI Trustee or FED). None of the paper work on these transactions reflected Cypress' name. No statements were ever sent by Cypress. PISI serviced the loans and issued IRS form 1099's.
48. Fanelli did see Bard's business stationary and card which reflected Bard's business as PISI. Both showed that PISI was located in San Jose and was a California loan brokerage firm involved in real estate finance and investments. Both also stated "securities offered through Cypress Capital Corporation" and reflected Cypress' address in Danville, California.
49. All correspondence to Fanelli concerning loan investments proposals came from PISI, as did all documents concerning plaintiffs' investments and PISI's servicing of those investments.
50. Bard did have in the PISI office a Cypress compliance manual and a plaque on his wall that indicated securities offered through Cypress. Bard did make some statements to Fanelli about his involvement with Cypress.
51. Although Fanelli claims he and FED invested in trust deeds through PISI based upon his belief that Bard was acting as a representative of Cypress and that Cypress had authorized the investments, this testimony is belied by more convincing evidence.
a. Fanelli was involved with Bard before Bard was associated with Cypress.
b. After Fanelli learned of the problems with the subject transactions and needed to investigate records, he never called Cypress to make inquiry or to seek satisfaction.
c. Fanelli is a sophisticated investor who has had accounts with various securities firms. In all cases the firms have sent statements and other materials pertinent to Fanelli's accounts. Fanelli never received any statements or other communication from Cypress.
d. Fanelli had a close business relationship with Bard and trusted him sufficiently to go into a general partnership, FED, with him. He relied on Bard's expertise and his own review of properties in making trust deed investments. He never placed a call to Cypress for any purpose.
CONCLUSIONS OF LAW Plaintiffs' Claims
1. Plaintiffs' First Amended Complaint asserts causes of action for:(1) Violation of 1933 Securities Act §§ 5 and 12(1);
(2) Violation of 1933 Securities § 12(2);
(3) Violation of 1933 Securities Act § 15 and Securities Exchange Act of 1934 § 20;
(4) Violation of § 10(b) of Securities Exchange Act of 1934 and Rule 10b-5 thereunder;
(5) Violation of California Corporations Code §§ 25110, 25503 and 25504;
(6) Violation of California Corporations Code §§ 25401, 25501 and 25504.1;
(7) Fraud, misrepresentation and negligence;
(8) Negligent misrepresentation and negligence; and
(9) Conversion.
Whether the Subject Investments Involved Securities
2. Cypress initially argued that the transactions at issue did not involve securities. However, after the evidence was presented, Cypress seemed to back off this contention. In Reves v. Ernst Young, 494 U.S. 56, 63 (1990), the Supreme Court adopted the Second Circuit's "family resemblance test" for determining whether or not a note is a security. The test begins with the presumption that "any note with a term of more than nine months is a security." 11. The presumption is rebuttable, if the issuer can demonstrate that the note in question "bears a strong family resemblance to an item on the judicially crafted list of exceptions." Id. at 63-64. Examples of notes which are not normally considered securities include notes secured by home mortgages. However, fractionalized notes have been considered securities. See, Underhill v. Royal, 769 F.2d 1426, 1431 (9th Cir. 1985). Whether a note is a security must be determined on a case-by-case basis. See, S.E.C. v. R. G. Reynolds Enterprises, Inc., 952 F.2d 1125, 1131 (9th Cir. 1991); Leyva v. Superior Court, 164 Cal.App.3d 462 (1985).
Reves sets forth four factors to examine in determining whether a note is a security: (1) the motivations of the buyer and seller and whether the buyer is interested primarily in the profit the note itself is expected to generate; (2) the plan of distribution and whether the investment was offered to a broad segment of the public or was essentially private; (3) the reasonable expectations of the investing public vis-a-vis these type of instruments; and (4) the existence of another regulatory scheme making the protection of the securities laws unnecessary. Reves, supra, at 66-67. Such an examination here leads to the conclusion that the investments were securities. Bard was making these investments available to the general public and buyers were primarily induced to invest in the hope of making a profit. Further, although California real estate laws offer some protection, the federal and state securities laws are probably also needed to fully protect investors from the risks associated with fractionalized deeds of trust. The court reaches its conclusion realizing that the AFAB and Fisher notes were not fractionalized. However, Bard sold these notes in the same manner as he sold fractionalized interest and undoubtedly would have fractionalized the notes had he been requested by interested investors to do so.
Respondeat Superior Liability
3. A broker-dealer may be liable for the acts of its registered representatives if (a) the representative is acting within the scope of his or her relationship with the broker-dealer or (b) he or she makes a statement with the actual or apparent authority of the broker-dealer. Hollinger v. Titan, 914 F.2d 1564, 1576-1578 (9th Cir. 1990), cert. denied, 499 U.S. 976 (1991).
4. Bard was clearly not acting with the actual authority of Cypress in offering the mortgage investments. Cypress had not authorized Bard to sell the subject investments or even this type of investment. Bard was doing so without Cypress' knowledge. Bard treated his real estate finance business and the sale of note investments as separate from any securities business he was doing through Cypress. No actual agency existed with respect to Bard's sale of the subject investments.
5. In order to find that Bard was the ostensible agent of Cypress, the evidence must establish: (1) that Cypress, by statements or conduct intentionally or negligently, caused or allowed Fanelli reasonably to believe that Bard was the agent of and had authority to act for Cypress; (2) that in dealing with Bard, Fanelli was justified in acting in reliance upon the belief that Bard was the agent of Cypress; and (3) that in reliance upon Bard's apparent authority to act as agent for Cypress, Fanelli parted with something of value. 1 Witkin, Calif. Law (9th ed.), Agency, §§ 93-95, Seneris v. Haas, 45 Cal.2d 811, 830 (1955). Apparent authority depends on the conduct of the principal and not the conduct or representations of the agent. Kohn v. Optik, CCH Fed. Sec. L. Rptr ¶ 97, 435 (C.D. Cal. 1993); Peterson v. Securities Settlement Corp., 26 Cal.App.3d 1445 (1991). Plaintiffs' evidence fails to show that Bard was Cypress' ostensible agent. First, Cypress did not know of Fanelli or communicate with him. Cypress did nothing to place Bard in the position of having apparent authority to sell trust deed investments. Although Fanelli and other investors may have been aware that Bard was a registered agent, Cypress gave Bard nothing which in any way indicated that Bard was selling trust deed investments through Cypress. Bard had no investment literature with Cypress' name on it advertising the investments or offering them for sale. This is not a situation like that involved in Reusche v. California Pac. Title Ins. Co., 231 Cal.App.2d 731, 737 (1965) where the court found apparent authority because the principal knew of the transactions at issue as they were being closed and yet failed to disavow the agent's authority to act.
Second, Fanelli was not justified in believing that Bard was acting as Cypress' agent (assuming for the moment that he did). Fanelli, who had dealt with several securities dealers before he made the subject investments, had sent his checks directly to the broker-dealer and received confirmations and statements in return. Fanelli had no such communications with Cypress. Further, Fanelli does not dispute that when he initially realized that Bard might be defrauding him, he did not contact Cypress. Certainly, an investor who was defrauded by a broker-dealer's representative would logically contact the broker-dealer. The absence of such contact by Fanelli suggests that he had no belief that Cypress bore some responsibility to him. Moreover, although Fanelli apparently saw Bard's stationary, business card and plaque indicating Bard's association with Cypress, Fanelli began his investment relationship with Bard before Bard's association with Cypress.
Claim under 1933 Securities Act §§ 5 and 12(1)
6. Liability under § 12(1) ( 15 U.S.C. § 771 (1)) extends to one who offers or sells a security in violation of § 5. § 5 ( 15 U.S.C. § 77e) makes unlawful the direct or indirect use of any means in interstate commerce or the mails to offer to sell any security unless the appropriate registration statement has been filed. Under Pinter v. Dahl, 486 U.S. 622, 641-22 655 (1988), liability as a seller extends beyond those who pass title to a security. Liability can be imposed on those who solicit a purchase "motivated at least in part by a desire to serve [their] own financial interests or those of the securities owner." 486 U.S. at 647. Plaintiffs, however, have offered no evidence that Cypress solicited the transactions at issue or that Cypress expected to gain financially from the transactions. In fact, no evidence suggests that Cypress even knew of the transactions. Cypress cannot be held liable under §§ 5 and 12(1).
Claim Under 1933 Securities Act § 12(2)
7. § 12(2) makes unlawful the offer or sale of a security in interstate commerce or the mails by means of a prospectus or oral statement which includes a material untrue statement or omits a material statement. Plaintiffs' evidence fails to show that Cypress was involved in the offer or sale of the subject investments.
Claim under 1933 Securities Act § 15 and Securities Exchange Act of 1934 § 20
8. Plaintiffs contend that Cypress is liable as a controlling person under § 15 of the 1933 Act ( 15 U.S.C. § 77o) and under § 20 of the 1934 Act ( 15 U.S.C. § 78t). In Hollinger v. Titan Capital Corp., 914 F.2d 1564, 1573 (9th Cir. 1990) the court pointed out that, as a matter of law, a broker-dealer is a controlling person with respect to its registered representative subject, however, to a defense of good faith. The court further explained that a broker-dealer is not necessarily liable for all actions taken by its registered representatives and is not the insurer of its representatives. Id. at 1575. In addition to the statutory defense of good faith, a broker-dealer could defend against controlling person claims by showing that the actions of the representative were actions outside the scope of the broker-dealer's control:
The broker-dealer may also, of course, rely on a contention that the representative was acting outside of the broker-dealer's statutory "control." For example, [the broker-dealer] could argue that when the appellants entrusted their money to [the representative] they were not reasonably relying upon him as a registered representative of [the broker-dealer], but were placing the money with [the representative] for purposes other than investment in markets to which [the representative] had access only by reason of his relationship with [the] broker-dealer.
Id. at 1575-76, n. 26. The Ninth Circuit reaffirmed the Hollinger analysis in Hauser v. Farrell, 14 F.3d 1338, 1341 (9th Cir. 1994). See, Kohn v. Optik, CCH Fed. Sec. L. Rptr. ¶ 97, 435 (CD. Cal. 1993).
The evidence is clear that Fanelli did not rely on Bard as a representative of Cypress when he, Fanelli, invested in the mortgage investments. Further, the market for these investments appears to have been established before Bard even became a representative with Cypress. Certainly, Bard had access to markets for trust deed investments other than "only by reason of his relationship" with Cypress.
Good faith is a defense to a § 12 violation. 15 U.S.C. § 77o provides for the liability of control persons, "unless the controlling person had no knowledge of or reasonable ground to believe in the existence of the facts by reason of which the liability of the controlled person is said to exist." Cypress has established its good faith. Cypress had no knowledge of Bard's conduct in selling the subject investments. Further, its supervision of Bard was reasonable (see conclusion 9 below) and, therefore, it cannot be blamed for Bard's misconduct.
Claim Under § 10(b) of Securities Act of 1934 and Rule 10b-5 Thereunder
9. In order to maintain a claim under Rule 10b-5, a plaintiff must prove: (1) that the defendant used the mails or an instrumentality of interstate commerce in connection with the sale of securities; (2) that defendant made a material misrepresentation or omission of material fact; (3) that the defendant acted with scienter; (4) that plaintiff justifiably relied upon defendant's conduct; and (5) that plaintiff suffered damages as a result of defendant's conduct. Ernst and Ernst v. Hochfelder, 425 U.S. 185 (1976).
In this case, Cypress made no representations to Fanelli, and Fanelli never communicated with Cypress. Moreover, Cypress was not involved in the preparation of the transaction documents. Fanelli, on the other hand, was intimately involved in the transactions, particularly in those in which his partnership FED invested.
The only possible evidence of Cypress' involvement is Bard's letterhead and business card indicating his relationship with Cypress, a plaque on Bard's wall indicating that Bard was a registered securities representative with Cypress, and the presence of a Cypress compliance manual in Bard's office. However, these materials are insufficient to support a conclusion that Cypress had any input into the preparation of offering materials for the trust deed investments.
Plaintiffs' arguments for liability under Rule 10b-5 focus on the alleged failure of Wanderer, Cypress' chief compliance officer, to adequately supervise Bard. However, even if all reasonable inferences are drawn in favor of plaintiffs, Wanderer's conduct does not rise to the level of recklessness which is required to prove scienter under Rule 10b-5. Negligence does not establish scienter. Ernst, supra, 425 U.S. at 201. The recklessness conduct necessary to satisfy the scienter requirement is conduct "involving not merely simple, or inexcusable negligence, but an extreme departure from the standards of ordinary care, and which presents a danger of misleading buyers and sellers that is either known to the defendant or is so obvious that the actor must have been aware of it." Hollinger v. Titan, supra, 914 F.2d at 1569.
The evidence shows, in fact, that Wanderer's supervision of Bard was reasonable. Cypress' supervisory procedures were contained in a compliance manual which was given to and explained to Bard prior to his becoming registered with Cypress. This manual appears to comply with SEC, NASD, and California Department of Corporations requirements. In addition to maintaining written compliance procedures, Cypress carried out the following supervisory activities with respect to Bard: (1) periodic visits to his office; (2) obtaining affirmations of compliance with all current rules and regulations, including specifically the "selling away" rule which requires a representative to inform his broker of any personal securities transactions; (3) holding compliance meetings, at least one of which Bard attended; and (4) review of what Bard represented to be his securities files.
Claim Under California Corporations Code §§ 25110, 25503, and 25504
10. California Corporations Code § 25110 makes unlawful the offer or sale of nonexempt securities which are not qualified. California Corporations Code § 25503 provides that any person violating § 25110 shall be liable to the person who acquired the security. California Corporations Code § 25504 provides that every person who directly or indirectly controls a person liable under § 25503 and every broker-dealer who materially aids in such transaction is jointly and severally liable unless it had no knowledge of or reasonable grounds to believe in the existence of the facts by reason of which the liability is alleged to exist. For the reasons discussed above in connection with the alleged violations of federal securities laws, plaintiffs' proof fails to establish liability of Cypress under any of these state statutes.
Claim Under California Corporations Code §§ 25401, 25502 and 25504.1
11. California Corporations Code § 25401 makes it unlawful to offer or sell securities through untrue statements or omissions of material facts necessary to make statements not misleading. California Corporations Code § 25501 provides a remedy for a violation of § 25401. California Corporations Code § 25504.1 makes liable any person who materially assists in the violation of § 25110 with the intent to deceive or defraud. Again, for the reasons set forth above in connection with the alleged violations of federal securities laws, plaintiffs' evidence does not establish responsibility of Cypress under any of these state statutes.
State Tort Claims
12. Plaintiffs allege that Cypress is liable for fraud, negligent misrepresentation, and conversion. The elements of fraud are: (1) the defendant's misrepresentation or concealment, (2) the defendant's knowledge of the falsity, (3) the defendant's intent to induce reliance, (4) the plaintiffs justifiable reliance, and (5) resulting damage to the plaintiff. Cal. Civ. Code § 1709. All of the allegedly fraudulently conduct set forth by plaintiffs is conduct by Bard, not Cypress. Since respondeat superior liability has not been established, Bard's conduct cannot serve as a basis for liability of Cypress.
13. A defendant is liable for negligent misrepresentation when he or she makes a false statement without reasonable grounds for believing the statement to be true. Byrum v. Brand, 219 Cal.App.3d 892, 896 (1990). Again, plaintiffs have failed to prove any false statements by Cypress.
14. Conversion is the wrongful exercise of dominion over personal property of another. 5 Witkin, Calif. Law (9th ed.), Torts, § 610. Plaintiffs have presented no evidence of the exercise of dominion by Cypress over any property of plaintiffs. The evidence shows that Cypress was not aware of the transactions between Bard and plaintiffs and, therefore, could not have interfered with plaintiffs' property interests. The alleged acts of dominion were Bard's, and, as discussed above, Bard was not Cypress' agent for the purposes of the subject transactions.
ENTRY OF JUDGMENT
In view of these findings and conclusions, judgment shall be entered in favor of defendants and against plaintiffs, and plaintiffs shall take nothing by way of their complaint.
JUDGMENT
This case was tried before the undersigned on June 15, 16, 20 and 21, 1994. The court has rendered its findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure. Therefore,
It is hereby ordered and adjudged that plaintiffs take nothing, that the action be dismissed on the merits, and that the defendants recover of plaintiffs their costs of suit.