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Ferguson and Welborn (D), doing business as F&W Development Company, purchased two apartment buildings containing 32 two bedroom units from the U.S. Corps of Engineers. The buildings were to be removed to a new location, refurbished, leased to tenants and then sold at a profit. Ds ran low on cash and contacted Williams (P) and sold him a 1/4th interest in the venture for $15,000. With this money, D's purchased land nearby and paid $5,000 as earnest money. Ds used the balance of P's money to secure a $300,000 permanent mortgage loan commitment. The venture failed because of the inability of D's to obtain interim financing. The buildings were dismantled and the parts sold to pay debts. P sued D to recover the funds invested. The trial court gave P judgment for $30,518.83, $5,000 in exemplary damages, and attorney fees of $20,179. The trial court determined that the investment was an investment contract that was not registered with the State Securities Board and was sold by false representations, that Ds were negligent in management and P was entitled to rescind and recover all funds invested. D appealed.

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