Thomas, Head & Greisen Employees Trust Ronald E. Greisen Henry P. Head v. Jack Buster, and Terry D. Parks and Northern Financial

Opinion by Judge HUG; Dissent by Judge FERGUSON.

This appeal concerns the investment by an ERISA-regulated Employee Trust Fund in deed of trust notes secured by real property. The Trust purchased various notes from Northern Financial, a general partnership comprised of Jack Buster and Terry Parks. Appellant Buster challenges the district court’s determination that he served as a fiduciary to the Trust, and that he was liable' to the Trust for breach of fiduciary duty for misrepresentations made with respect to the sale of deed of trust notes. We affirm.

I.

BACKGROUND

Thomas, Head & Greisen Employees Trust (“Trust”) is an employee trust fund subject to the Employee Retirement Income Security Act (“ERISA”). The Trust was established by Thomas, Head & Griesen, a professional corporation of certified public accountants. Jack Buster developed a business relationship with the trustees of the Trust, Henry Head and Ronald Greisen (“Trustees”), whereby Buster would locate and investigate deed of trust notes for investment by the Trust. Buster earned a commission from the sale of these notes.

In 1983, Buster joined Terry Parks and formed a general partnership, Northern Financial.…

dissenting:

In this ease, a professional corporation of certified public accountants formed an ERISA trust in which its members were the major beneficiaries. The Trust made returns of 20% per annum on its money by gambling on the Alaskan real estate market. When the market dropped, the Trustees succeeded in convincing the district court that it was not their mismanagement of the Trust that was to blame for not making a 20% profit on three real estate transactions, but rather the fault of real estate mortgage brokers Jack Buster and Terry Parks, the persons who sold them the mortgage investments. 1 Instead of granting the Trustees’ claims on common law fraud, the district court federalized their state tort claims by concluding that one who sells his own property to an ERISA trust is a financial advisor.

In 1977, Buster formed with another person the limited partnership Kavik Mortgage Investors for the purpose of investing in notes secured by real estate deeds of trust. The ERISA trust invested $50,000 and became a limited partner. The partnership agreement followed standard partnership law, providing that the general partner was a fiduciary to the limited partners. See generally…

24 F.3d 1114 62 USLW 2772 , 18 Employee Benefits Cas. 1293 THOMAS, HEAD & GREISEN EMPLOYEES TRUST; Ronald E. Greisen; Henry P. Head, Plaintiffs-Appellees, v. Jack BUSTER, Defendant-Appellant, and Terry D. Parks and Northern Financial, Defendants. No. 92-36732. United States Court of Appeals, Ninth Circuit. Argued and Submitted Nov. 4, 1993. Decided May 18, 1994. A. Lee Petersen, Law Offices of A. Lee Petersen, Anchorage, AK, for defendant-appellant. Jean E. Kizer, Bliss Riordan, Anchorage, AK, for plaintiffs-appellees. Appeal from the United States District Court for the District of Alaska. Before: GOODWIN, HUG and FERGUSON, Circuit Judges. Opinion by Judge HUG; Dissent by Judge FERGUSON. HUG, Circuit Judge: 1 This appeal concerns the investment by an ERISA-regulated Employee Trust Fund in deed of trust notes secured by real property. The Trust purchased various notes from Northern Financial, a general partnership comprised of Jack Buster and Terry Parks. Appellant Buster challenges the district court's determination that he served as a fiduciary to the Trust, and that he was liable to the Trust for breach of fiduciary duty for misrepresentations made with respect to the sale…