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the unit 10 lots, Paullus outlined a plan to the board for a
joint venture with outside investors. Ridgemark would contribute
the unit 10 lots that would be utilized for the venture. The
purchase and transfer of the unit 10 property was completed on
March 27, 1989, for a final gross selling price of $11,250,000.
On April 7, 1989, Paullus exercised his option to purchase
the outstanding shares of his fellow shareholders in Ridgemark.
After the transaction, petitioners personally owned 36.32 percent
of Ridgemark's outstanding shares. Paullus, along with his wife,
were also the trustees of the Loren and Donna Paullus Family
Trust, which owned 35.02 percent of Ridgemark’s outstanding
shares. In 1990, Ridgemark sold its golf courses, clubhouses,
and recreational facilities for $12 million to the members of
Ridgemark Golf and Country Club.
The property acquired by Ridgemark as an exchange consisted
of approximately 2,261 acres (the Paicines property). The
Paicines property was acquired with the intention of developing a
new and expanded golf course and resort facility. Approximately
1,000 acres were contemplated for five or six golf courses,
clubhouses, and appurtenant buildings. To obtain a better
financing note, the Paicines property was zoned for residential
purposes.
From 1980 to 1993, Ridgemark filed statements with the State
of California, and in the space for the “type of business”, the
following was reflected:
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