State v. GoodmanState v. Goodman
- Reporters:
- ,
- Before:
- Eubank
*253 OPINION
EUBANK, Judge.
Thе appellant was tried before a jury and found guilty of two felonies, sale of unregistered securities (
Appellant contends on appeаl that, (1) the State failed to prove all the essential elements of the crimes as alleged in the information, and (2) the appellant’s security sаle was exempt from registration.
The record shows that the sale in question occurred on March 3, 1972, in the home of the complaining witness, Mrs. Steinel, at which time she gave the appellant a check for $1000 made out to the order of American Standard Insurance in exchange for a bond whiсh was to be delivered to her later by the defendant. Mrs. Steinel received no receipt or other document for her purchase price and no bond was ever delivered to her. Following the sale she became suspicious of the transaction and notified the authorities. This prosecution followed. The information filed against the appellant charged him with selling or offering to sell an unregistered 10% debenture bond of American Stаndard Life Insurance Company in violation of
At the trial, the- State established that the company in question had no bonds registered with the Securities Division of the Arizona Corporation Commission, аnd, in fact, that no such bonds existed. It is ap-pelíanos contention that one cannot sell a non-existent security and be in violation of
There is nо dispute in the evidence that a security of some type was sold to Mrs. Steinel by the appellant. The complaining witness stated that it was a bond, whilе the appellant maintained it was really an exempt corporate promissory note. In either case, the item sold was a security within thе definition of
In Towne v. Friedrich, 207 Cal.App.2d 205, 24 Cal.Rptr. 400 (1962), a California court was faced with the same situation as that presented in the case at bar. There the defendant represented to thе buyer that certain corporate stock was available through a friend and as a result the buyer paid $12,500 to the defendant for the stock. Howеver, no such stock was ever delivered to the purchaser since neither the stock nor the corporation existed. The court held that since the defendant *254 had not obtained the permit required to sell the securities of this purported corporation, the sale was in violation оf the state securities laws even though no securities changed hands or even existed. We believe that the result reached in Towne is also called for here by virtue of the public policy underlying Arizona’s securities laws. The purpose of the Act is to protect the public against fraudulent and illegal stock and investment schemes engaged in by dishonest or overzealous promoters. Jackson v. Robertson, 90 Ariz. 405, 368 P.2d 645 (1962). The securities laws give the Corporation Commission an opportunity to examine the underlying merits of proposed security sales in order that the purpose of regulation can be achieved and both buyers and legitimate sellers of securities protected. To say that the seller who sells worthless securities is subject to the provisions of the statute, while a seller who purports to sell “non-existent” securities and never delivers them is not so subject, would clearly defеat the legislative intent and policy of the statutes. Obviously, the problem of proof in the latter instance often precludes prosecutiоn.
Furthermore, the applicable statutes include
offers to sell
a security within the criminal prohibition. The information charges the appellant, in both counts, with the sale of or
offering for sale
the bond, and the jury was so instructed. Had thе legislature intended the restrictive interpretation of
Appellant also contends that the security he sold Mrs. Steinel was exempt under A. R.S. § 44 — 1843, subsec. 8, which exempts from registration negotiable promissory notes which mature in less than twelve months time. He argues that аn exempt corporate promissory note of Southwestern ’ States .Securities was actually sold to Mrs. Steinel, and that Mrs. Steinel’s check was made payable to American Standard Insurance only because of the common ownership of the two companies.
Our review of the evidence shows that while the appеllant testified positively that the security offered Mrs. Steinel matured within one year, there was no evidence supporting a maturity date longer than one year offered by the State. Under such circumstances, we agree with the appellant that the burden of proving the guilt of the appellаnt beyond a reasonable doubt in both counts of the information was not met by the State.
The judgment and sentence of the trial court is therefore reversed.
HAIRE, P. J., and JACOBSON, C. J., Division 1, concur.
Notes
. Ҥ 44-1801
13. ‘Security’ means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or particiрation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable shаre, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a ‘security,’ or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.”
. We would note thаt the jury was not instructed by the trial judge that the appellant was faced with a burden of proof with respect to proving the exemption. Instead, and to appellant’s favor, the jury was instructed that the burden of proof rested totally with the State. No objection was made to the instructions given, nor is any argument made on appeal as to its omission.