The PEOPLE, Plaintiff and Respondent, v. David Warren HOLDER, Defendant and Appellant.
Defendant, David Warren Holder, appeals following his conviction by jury of twenty counts of violating Penal Code section 487, subdivision 1, grand theft; four counts of violating Corporations Code sections 25110 and 25540, the sale of an unqualified security; five counts of violating Corporations Code sections 25401 and 25540, unlawful sale of the security by means of a written communication which includes an untrue statement of a material fact or omits to state a material fact; and one count of violating Corporations Code section 25541, employing a scheme in the sale of a security that operates as a fraud upon investors.
Defendant was sentenced to a total unstayed term of 10 years in state prison with presentence credit of 927 days. After addressing each of defendant's contentions on appeal, we will affirm the judgment.
Defendant was paroled to California in February 1980 after serving a prison sentence in Ohio for grand theft by scheme. He met Madeline Soto-Donelson, the owner of a Merced automotive business, in March of 1980. Subsequently, defendant convinced Mrs. Donelson to go into business with him, and they formed an investment corporation called M. Soto and David Warren Holder, Investments. Mrs. Donelson mortgaged her house to raise the money to start the corporation. The corporation's name was changed later to Creative Investment Concepts (CIC). Creative Finance Corporation (CFC) was formed as a subsidiary of CIC. CFC was developed allegedly to be a mortgage loan brokerage company. The charges against defendant stem from his involvement with CFC.
Defendant retained John Bucan to perform the legal work for CIC and CFC. He later hired Robert Grant who also performed legal work for the corporations and who became a general manager of the daily operations of CFC. Richard Payton was hired to work for the corporations. His job was to oversee the furnishings of the corporate offices located in Merced. He also was responsible for hiring and managing the secretarial staff.
One of the first activities defendant engaged in was the development of a company brochure. The brochure was developed primarily by defendant with some input from Payton. It was designed to introduce the company to potential investors and included background information on defendant and the other officers and investment consultants working for CIC and CFC. The brochure also included a profile of current investments and assets of the corporations. This contained a list of real properties and their values as appraised by MAI and SREA certified appraisers. Virtually every piece of information contained in the brochure was false.
Defendant began his operation by placing ads in various newspapers that solicited investors. The ads indicated the investor could expect a high rate of interest as a return on the investment. Investors would respond to the ads in person or by phone and were handed or mailed a corporate brochure. Follow-up meetings with defendant or another investment consultant were standard.
The investors were told that their investments would be collected and loaned to commercial land developers. These “borrowers” would be willing to pay a high rate of interest on the money loaned to them by CFC. CFC in turn would pay high interest rates to its investors. The investors were to get periodic interest payments and would receive the principal amount at the end of the investment period. The investments varied in length but were generally short-term investments. After the investor made his investment, he was sent a promissory note showing the investor's fractionalized interest in the note. Each investor also received a deed of trust on a particular piece of property to secure the investment. The investor had no control of the management of his money once it was invested with CFC. Most investors received a few interest payments but none has received his principal investment.
Legitimate commercial buyers were never solicited by anyone at CFC. CFC had made five loans with the money supplied by investors. Three loans were made to the defendant. One loan was made to CIC. The last loan was made to the Tierra-Sierra Corporation for the purpose of developing a lot in Modesto. Two of defendant's loans were made on the basis of property owned by defendant and located on Highway 140. Defendant's other loan was taken on the basis of the Century Bowl property owned by defendant. The loan to CIC was made on the basis of property in Cathey's Valley taken in the name of CIC.
Investments purportedly were secured by deeds of trust on one of the above listed properties. The deeds of trust, however, were never recorded. Furthermore, the properties apparently were never developed with the money invested with CFC and loaned to the “borrowers.” On numerous occasions, defendant used his loan proceeds to charter private jet trips to Las Vegas for the purpose of gambling. On another occasion, defendant used the money to take friends and associates to the Super Bowl in New Orleans.
On April 1 and 8, 1981, the California Department of Corporations served defendant, the corporation and its employees with a desist and refrain order. The department maintained CFC was offering for sale securities and that CFC would have to register with the department for a permit to sell the securities. The purpose of the desist and refrain order was to stop CFC from soliciting funds from investors until the corporation was registered and the securities qualified. Defendant was told the order did not stop him from making interest payments to current investors.
Defendant testified that he wanted only to be the biggest mortgage loan broker in the state. He contended that Payton had the control of the corporation, and that Payton developed the brochure with minimal input from defendant. Defendant admitted the brochure contained falsehoods, but he maintained throughout his testimony that his attorneys, Bucan and Grant, told him the brochure was only puffery and was, therefore, legal. Defendant also testified that his attorneys informed him he could use his loan proceeds for any purpose he desired.
Defendant initially testified to his work history omitting the years 1977 and 1978. He later testified that he had worked in Ohio and had some “problems” caused by his ignorance of the laws and had spent some time in a “reformatory.” In fact, defendant had committed grand theft by scheme in Ohio and was imprisoned for that period of time. Defendant concluded his testimony by stating that the jury had a right to know all of the facts pertinent to the case and, therefore, he was compelled to reveal that his prior conviction in Ohio was for grand theft.
After defendant learned that a warrant was out for his arrest, he went into hiding. Law enforcement officers finally found him two months later in Montana and arrested him.
IDid the trial court err in allowing defendant to be cross-examined about the details of his prior felony conviction?
Defendant was convicted of grand theft by deception in Ohio and served a prison sentence in that state. Upon completion of his prison term in 1980, defendant was paroled to California. Defendant testified in his own behalf. On cross-examination, the prosecutor was allowed to inquire about the facts and circumstances surrounding defendant's conviction. Defendant contends on appeal that the questioning was highly prejudicial and that the trial court should have barred the questions under Evidence Code section 352.
The circumstances leading to this cross-examination began with defendant twice moving the court to exclude his prior felony conviction for impeachment purposes or for any other purpose under Evidence Code section 352. The prosecutor argued that the prior conviction was being offered not for impeachment purposes, but as an element of the offense of violating section 25401 of the Corporations Code. Both motions were denied.1 To avoid having the prior conviction mentioned in the prosecution's case-in-chief regarding section 25401 of the Corporations Code, defendant stipulated that he omitted a material fact (his conviction) from the corporate brochure. The prosecutor subsequently did not introduce defendant's prior during the People's case-in-chief.
Before defendant's case-in-chief, the trial court ruled the prior conviction could not be used for impeachment purposes. However, the court ruled that the prosecutor would be permitted to ask questions about certain facts surrounding the offense. Defense counsel agreed to this ruling. After defendant started to testify, another discussion on the matter was had in which defense counsel again agreed that the facts of the crime could be explored on cross-examination, but was adamant that prison and the fact of conviction should not be mentioned.
Defendant testified on direct examination to the following facts: Defendant created CFC to be run as a legitimate mortgage loan brokerage company. He knew the corporate brochure contained falsehoods and misstatements, but he maintained that at all times he was acting under the advice of his attorneys and Richard Payton. Defendant also stated he did not have the slightest idea of the source from which some of the brochure data originated. He testified about his employment history from 1971 to 1980. He neglected to mention exactly the work he did in Ohio, although he did state that he had been affiliated with Hadco and Remar, two companies in Ohio. Defendant finally told the jury he had been in “trouble in Ohio” and that he “went to the reformatory.” He hired attorneys in California to be sure that he did not break any laws here inadvertently. He also testified that he had a parole officer in California. Finally, defendant stated that he had been convicted of theft in Ohio.
The prosecutor was allowed to question defendant about the facts surrounding his offense in Ohio. Defense counsel objected several times during the examination on the basis that the facts and details were irrelevant. To these objections, the trial court responded that defendant had opened the door to such inquiry. Defendant now contends the questions should have been excluded under Evidence Code section 352.
Plaintiff contends that defendant has waived this issue on appeal. We agree. “Where inadmissible evidence is offered, the party who desires to raise the point of erroneous admission on appeal must object at the trial, specifically stating the grounds of his objection, and directing the objection to the particular evidence which he seeks to exclude. Obviously, failure to object at all waives the defect.” (Witkin, Cal.Evidence (2d ed. 1966) Introduction of Evidence at Trial, § 1285, p. 1188.) Furthermore, Witkin states: “The typical general objection—that the evidence is ‘incompetent, irrelevant and immaterial’—is ordinarily insufficient and a waiver of the defect. But any other form which does not specify the particular defect may be called a general objection and is equally futile.” (Witkin, op. cit. supra, § 1288, p. 1191.) To preserve this issue on appeal, defendant should have objected at trial to the admissibility of the evidence specifically on the basis of Evidence Code section 352. (People v. Quaintance (1978) 86 Cal.App.3d 594, 599, 150 Cal.Rptr. 281; People v. Maxey (1972) 28 Cal.App.3d 190, 196, 104 Cal.Rptr. 466.) Defense counsel failed to do so.
It is true that motions to exclude the prior on the basis of Evidence Code section 352 were presented by defendant prior to trial. These motions were denied upon plaintiff's argument that the prior was an element of the charged violation of Corporations Code section 25401. Defendant then stipulated that he omitted a material fact from the corporate brochure to avoid evidence of the prior. After defendant voluntarily testified concerning the prior, defense counsel objected to the prosecutor's questions regarding the details of the prior conviction solely on relevancy grounds. None of the few objections made by defense counsel at trial were premised on Evidence Code section 352. Furthermore, defense counsel on two occasions agreed that the prosecutor would be allowed to question defendant about the details of the prior conviction. A more clear instance of waiver would be difficult to imagine.
Also, it should be noted that the trial court properly overruled defense counsel's objection of irrelevancy at trial. Inquiry into the facts of defendant's prior offense undoubtedly was within the proper scope of cross-examination. “When a defendant voluntarily testifies in his own defense the People may ‘fully amplify his testimony by inquiring into the facts and circumstances surrounding his assertions, or by introducing evidence through cross-examination which explains or refutes his statements or the inferences which may necessarily be drawn from them.’ (People v. Schader (1969) 71 Cal.2d 761, 770 [80 Cal.Rptr. 1, 457 P.2d 841].)” (People v. Harris (1981) 28 Cal.3d 935, 953, 171 Cal.Rptr. 679, 623 P.2d 240.)
Defendant testified in essence that his intent in dealing with the investors was entirely innocent. He claimed to have no knowledge of the source of some material included in his corporate brochure; for example, the balance sheet for CIC. He stated he was affiliated with Remar and Hadco. He inferred that his Ohio conviction was a result of an inadvertent violation of the corporate laws. He claimed he was in a reformatory. On cross-examination, then, the prosecutor was entitled to ask defendant to explain these statements and to refute any assertions made by defendant or any inferences to be drawn from his testimony. (People v. Schader (1969) 71 Cal.2d 761, 770–771, 80 Cal.Rptr. 1, 457 P.2d 841.) Therefore, the prosecutor could elicit information that defendant spent time in prison as well as a reformatory. The prosecutor also could present evidence that defendant had used a balance sheet almost identical to the one for CIC in his attempt to acquire money from a savings and loan operation in Ohio. Furthermore, evidence could be presented that Hadco and Remar were not legitimate corporations.
Did the trial court err in not instructing the jury sua sponte on the limited purpose of other-crimes evidence?
As indicated above, on cross-examination, the prosecutor was allowed to question defendant about the facts surrounding his prior conviction of grand theft in Ohio. Defendant contends this evidence was admissible only for the limited purpose of proving defendant's intent to commit grand theft and now argues the trial court had a duty to sua sponte instruct the jury on the limited admissibility of the evidence. This argument is totally without merit.
Defendant relies solely on People v. Williams (1970) 11 Cal.App.3d 970, 978, 90 Cal.Rptr. 292 for the proposition that a trial court has the duty to give a cautionary instruction to the jury on other-crimes evidence. The rule adopted in People v. Williams, however, was disapproved by the California Supreme Court. (People v. Collie (1981) 30 Cal.3d 43, 64, fn. 19, 177 Cal.Rptr. 458, 634 P.2d 534.) The court in People v. Collie states, “Although the trial court may in an appropriate case instruct sua sponte on the limited admissibility of evidence of past criminal conduct, we have consistently held that it is under no duty to do so.” (Id., at p. 63, 177 Cal.Rptr. 458, 634 P.2d 534.)
The Collie court did make the gratuitous statement, “There may be an occasional extraordinary case in which unprotested evidence of past offenses is a dominant part of the evidence against the accused, and is both highly prejudicial and minimally relevant to any legitimate purpose. In such a setting, the evidence might be so obviously important to the case that sua sponte instruction would be needed to protect the defendant from his counsel's inadvertence.” (Collie, supra, at p. 64, 177 Cal.Rptr. 458, 634 P.2d 534.)
We have been unable to find any such “extraordinary” case in which the trial court was held to have a sua sponte duty to instruct on the limited use of such evidence.
In the case at bench, the People concluded its case-in-chief without mentioning defendant's prior offense. Defendant took the stand and testified about his past work history from 1971 to the present, skipping over the time of the Ohio offense. His defense was based on the theory that his intent was entirely innocent as to the investors. He also testified that he had a prior felony conviction for grand theft. The prosecution cross-examined defendant in regard to the prior offense only in response to defendant's direct testimony. The evidence elicited on cross-examination was more than minimally relevant as it tended to rebut directly defendant's proffered defense. Finally, the evidence was not a dominant part of the evidence against the accused. This case, then, is not so “extraordinary” that the trial court should have given a limited instruction to the jury sua sponte.
Should the trial court have given Boykin-Tahl admonishments to defendant when it accepted defendant's stipulation?
Defendant was charged with five counts of violating Corporations Code section 25401, selling a security by means of a written communication that omits to state a material fact.2 The prosecution proposed to prove that the brochure sent to potential investors failed to state a material fact, that defendant had a prior felony conviction of grand theft by scheme. To avoid evidence of the prior coming before the jury, defendant offered to stipulate that a material fact had been omitted. The following stipulation was read to the jury: “Defendant stipulates that in connection with Counts 9, 7, 16, 18, and 28 there was an omission of a material fact in the brochure which was necessary, in light of the circumstances under which they were made to make it not misleading.” Defendant contends the trial court should have admonished him on the constitutional rights he was waiving by admitting his prior conviction in connection with the stipulation. This contention is incorrect.
Defendant's argument is premised on People v. Hall (1980) 28 Cal.3d 143, 167 Cal.Rptr. 844, 616 P.2d 826 (superseded as stated in People v. McGriff (1984) 158 Cal.App.3d 1151, 1156–1157, 205 Cal.Rptr. 232; People v. Callegri (1984) 154 Cal.App.3d 856, 866–867, 202 Cal.Rptr. 109). In that case, the defendant was charged with violating Penal Code section 12021, being an ex-felon in possession of a concealed weapon. The Supreme Court held that if the defendant stipulates that an element of a charged offense is satisfied, the prosecution must accept the stipulation. (Hall, supra, 28 Cal.3d at p. 152, 167 Cal.Rptr. 844, 616 P.2d 826.) Defendant stipulated to his ex-felon status as an element of Penal Code section 12021. In a footnote, the court held that this type of stipulation should be accompanied by Boykin-Tahl admonishments. (Hall, supra, at p. 157, fn. 9, 167 Cal.Rptr. 844, 616 P.2d 826.)
The language contained in this footnote, however, is not applicable to the case at bench. The Hall court appears to limit its holding to stipulations in which “the accused concedes the status element of a section 12021 charge.” The court specifically refused to consider if Boykin-Tahl admonishments would apply to other stipulations. (People v. Hall, supra, 28 Cal.3d at p. 157, fn. 9, 167 Cal.Rptr. 844, 616 P.2d 826.) In the case at bench, defendant did not stipulate to the status of an ex-felon as an element of Penal Code section 12021. He merely stipulated to omitting a material fact as an element of Corporations Code section 25401. Only one case subsequent to People v. Hall has held that Boykin-Tahl admonishments must be given when a defendant stipulates to an element of the charged offense, and that case involved a defendant charged with violating Penal Code section 12021. (People v. Turner (1983) 145 Cal.App.3d 658, 671, 193 Cal.Rptr. 614.) Application of the People v. Hall language to other types of stipulations, then, does not appear to be warranted by Hall or other cases.
Furthermore, the court in People v. Hall relies on two cases in reaching its conclusion that Boykin-Tahl applies, and neither case is particularly similar to the case at bench. In re Yurko (1974) 10 Cal.3d 857, 112 Cal.Rptr. 513, 519 P.2d 561 involved a charge under Penal Code section 644 that defendant was an habitual offender. Proving prior felony convictions is an element of the offense. (See former Pen.Code, § 644.) When defendant there admitted his prior felony convictions, the court held Boykin-Tahl admonishments were required. In the case at bench, being an ex-felon or having prior felony convictions is certainly not an element of the offense for which defendant was tried. (See Corp.Code, § 25401.)
The second case relied upon by the Hall court is Bunnell v. Superior Court (1975) 13 Cal.3d 592, 119 Cal.Rptr. 302, 531 P.2d 1086. The Bunnell court discussed People v. Mosley (1970) 1 Cal.3d 913, 83 Cal.Rptr. 809, 464 P.2d 473. In that case, the defendant submitted his case to the trial court on the basis of the preliminary hearing transcript. The Mosley court held that, on the facts of the case, defendant's conviction was inevitable after reading the preliminary hearing transcript and, in this sense, his stipulation was tantamount to a plea of guilty. In a footnote, the court noted for future use that Boykin-Tahl admonishments to such a stipulation would be required. (Mosley, supra, at p. 926, fn. 10, 83 Cal.Rptr. 809, 464 P.2d 473.)
In the case at bench, defendant's stipulation is not “tantamount to a plea of guilty” on the offenses charged. Defendant admitted one element in the Corporations Code section 25401 charge. The prosecution still had to establish that a security that was not exempt was involved and that the defendant was responsible for selling or offering to sell the securities.
Finally, this case is similar to a line of cases that holds the Boykin-Tahl admonishments need not be given when defense counsel stipulates to a fact that is not crucial to the case. (People v. McCoy (1974) 40 Cal.App.3d 854, 857–859, 115 Cal.Rptr. 559; People v. Chasco (1969) 276 Cal.App.2d 271, 273–276, 80 Cal.Rptr. 667.) In People v. Chasco, defendant was charged with the sale of narcotics. Defense counsel stipulated to the narcotic nature of the substance sold, heroin. The Chasco court held defense counsel could stipulate to this fact and further held that Boykin-Tahl did not apply to this stipulation. (Chasco, supra, at pp. 275–276, 80 Cal.Rptr. 667.) The court reasoned that although the prosecution had to prove the substance was a narcotic as an element of its case, because of defendant's theory of defense the content of the substance was not a major issue. (Id., at pp. 273–274, 80 Cal.Rptr. 667.)
In the case at bench, the prosecution had to prove that defendant omitted a material fact from the brochure. The district attorney intended to do this by showing defendant omitted his prior felony conviction from the brochure. Defense counsel stipulated to the omission for tactical reasons. As in Chasco, the stipulation does not involve a crucial fact of defendant's case. The defendant never argued that the brochure did not contain false material or that he did not omit any material facts from the brochure. His defense was that he thought he was running a legitimate business and that his attorney said the false material in the brochure was mere puffing, which was not illegal.
The court did not have the duty of advising defendant, pursuant to Boykin-Tahl, of the rights he was waiving by admitting an element of Corporations Code section 25401.
Does sufficient evidence support defendant's convictions of grand theft?
Defendant was convicted of 20 counts of violating Penal Code section 487, subdivision 1, grand theft. He claims the evidence does not support a finding of the required element of specific intent. Defendant claims he intended to operate a legitimate business and that the evidence supports this. Furthermore, evidence was presented by the defense that he intended to pay back all investors by refinancing the Century Bowl property. He also maintains, through his own testimony, that Richard Payton and Robert Grant were the real culprits and that he was their victim. These contentions, however, do not demonstrate a lack of sufficient evidence of defendant's specific intent to steal.
The standard of review regarding sufficiency of the evidence is well settled. “The general rule, of course, is that ‘When the sufficiency of the evidence is challenged on appeal, the court must review the whole record in the light most favorable to the judgment to determine whether it contains substantial evidence—i.e., evidence that is credible and of solid value—from which a rational trier of fact could have found the defendant guilty beyond a reasonable doubt.’ (People v. Green (1980) 27 Cal.3d 1, 55 [164 Cal.Rptr. 1, 609 P.2d 468].)” (People v. Dillon (1983) 34 Cal.3d 441, 455, 194 Cal.Rptr. 390, 668 P.2d 697.)
Grand theft may be committed by various means; for example, theft by trick or device, theft by embezzlement, theft by false pretenses. The trial court instructed the jury on each method of grand theft. A necessary element of any form of grand theft is the specific intent of the actor to defraud or deprive the victim of his money or property. (People v. Campbell (1976) 63 Cal.App.3d 599, 614–615, 133 Cal.Rptr. 815; People v. Fujita (1974) 43 Cal.App.3d 454, 467, 117 Cal.Rptr. 757.) The specific intent is a question of fact “to be determined from all the circumstances of the case, and usually must be proven circumstantially.” (Id., at p. 469, 117 Cal.Rptr. 757, citing to Perry v. Superior Court (1962) 57 Cal.2d 276, 285, 19 Cal.Rptr. 1, 368 P.2d 529.)
The evidence from which to infer defendant's intent to steal in this case is sufficient. Defendant was responsible for developing a brochure that he knew was grossly inaccurate. He, or his investment consultants, told the investors that their money would be loaned to commercial builders and developers of real estate. The investment money was never used for this purpose, outside of perhaps the Tierra-Sierra loan. Defendant “borrowed” money from CFC. The money was used not to develop property, but to gamble in Las Vegas, to charter private jets, and to send friends and employees to the Super Bowl in New Orleans. The investors also were told their loans would be secured by deeds of trust on real property. The investors did receive deeds of trust, but these were never recorded by defendant or anyone at CFC. The investors did not receive all of their interest payments nor have they received their principal investment. The interest payments some investors did receive actually were paid from the very money loaned to CFC.
A jury certainly could infer from these facts that defendant created CFC with the specific intent of defrauding investors of their money. Defendant's testimony that he thought he was running a legitimate business and that his intent was entirely innocent does not preclude a finding of the requisite specific intent. Defendant's story was rebutted by the prosecution, and the jury obviously chose to disbelieve defendant's testimony.
Did the trial court have a duty to instruct the jury sua sponte on the defense of innocent intent due to mistake of law?
Defendant's contention that the trial court had a duty to instruct sua sponte on the defense of innocent intent based upon mistake of law is summarized in his brief as follows:
“A review of the defense testimony indicates that [defendant] presented substantial evidence that he was operating at all times under advice of counsel and his broker and that he honestly believed he was complying with the law in offering the investments. In addition, his subsequent efforts to develop the various properties and his obtaining appraisals support his contention that he was operating under an honest and reasonable mistake of law that he was operating a bona-fide mortgage loan business.”
Defendant's opening brief contains a statement of facts covering 59 pages. However, part V of his brief wherein the court's failure to instruct sua sponte on the defense of innocent intent based upon mistake of law is urged, defendant's appellate counsel makes no reference to the record or to his own factual statement to call our attention to evidence presented at trial which would have required the court to instruct on the above defense.
Rule 15(a), California Rules of Court, provides:
“Each point in a brief shall appear separately under an appropriate heading, with subheadings if desired. Such headings need not be technical ‘assignments of errors' but should be concise headings which are generally descriptive of the subject matter covered. The statement of any matter in the record shall be supported by appropriate reference to the record. Every brief shall be prefaced by a topical index of its contents and a table of authorities, separately listing cases, statutes, court rules, constitutional provisions, and other authorities.”
We believe the principles set forth by this court in the recent case of People v. Dougherty (1982) 138 Cal.App.3d 278, 188 Cal.Rptr. 123, in which the contention on appeal was insufficiency of the evidence to establish the specific intent required to violate Penal Code section 487, are equally applicable here. There, appellate counsel completely failed to make appropriate references to the record in support of his contention. This court held under those circumstances the contention was deemed waived.
In the present case, appellate counsel has failed to direct our attention to any evidence presented at trial which would have required the trial court to instruct sua sponte on the defense of innocent intent based upon a mistake of law.
In any event, as stated in People v. Vineberg (1981) 125 Cal.App.3d 127, 137, 177 Cal.Rptr. 819:
“It has been recognized in California since the turn of the century that ignorance or mistake of law can negate the existence of a specific intent, and that it is a valid defense to a charge of theft that the accused honestly believed that he had the right to take the subject property even if such belief was based on a misconception of the law. [Citation.] It has also been recognized, however, for approximately the same length of time, that an accused is only entitled to such an instruction if the evidence supports a reasonable inference that any such claimed belief was held in good faith. [Citation.]” (Emphasis added.)
Our independent review of the record reveals only two possible bases for the mistake-of-law claim. Defendant testified that his attorneys told him the fake and misleading statements in the corporate brochure were only “puffery.” He was informed by Madeline Soto-Donelson's attorney, however, that the statements were more than mere puffery. Also, Robert Grant at one point told defendant that the description of CIC's assets as a current profile was inaccurate. He also testified on cross-examination that he only wanted to believe his attorneys. Furthermore, defendant recently had been convicted in Ohio of grand theft by scheme. In that offense he had used a false balance sheet for a company and used a false personal financial statement to defraud a savings and loan company of approximately $400,000. It is wholly unreasonable that defendant believed in good faith he could lawfully acquire money from investors by use of the CFC brochure.
Secondly, defendant testified that his attorneys told him that he could use the money he “borrowed” from CFC for any purpose. “In fact, I was told that once I borrowed the money, I was responsible for it, I had to pay it back, and it was mine to do with as I pleased.”
Considering that the investors were told their money would be used to make loans to commercial builders for developing property and the loans would be secured by deeds of trust on such property, it is unreasonable that defendant believed he could use the “borrowed” money for gambling, sports cars, gems, chartered jets, chauffeured limousines, and other purely personal pursuits.
We hold that the trial court was under no duty to instruct the jury sua sponte that a good faith mistake of law constituted a defense to the grand theft counts.
Are the investment transactions at issue securities within the meaning of the Corporations Code?
Defendant contends CFC did not engage in selling or offering to sell securities within the meaning of the Corporations Code. Hence, he claims his convictions based on Corporations Code sections 25110, 25401, 25540 and 25541 must be reversed. The transactions entered into between the investors and CFC, however, constitute securities.
The trial court ruled that the investment transaction in question was a security. This court must independently review the evidence and decide if a security is present. “[T]he determination of whether a particular instrument constitutes a security must be made on an ad hoc basis upon a review of the surrounding facts and circumstances and in light of the regulatory purposes to be served under the Corporate Securities Law. [Citations.] Ultimately, any determination must be resolved as a question of law. [Citation.]” (People v. Schock (1984) 152 Cal.App.3d 379, 385, 199 Cal.Rptr. 327.)
Corporations Code section 25019 defines security in pertinent part as: “any note ․ evidence of indebtedness ․ investment contract․” Under current case law, the investment transaction offered to the investors in this case falls within the meaning of note, evidence of indebtedness and investment contract.
Defendant created what was alleged to be a mortgage loan brokerage company. Newspaper ads solicited investors for short term investments with high interest rate returns. The investor would submit his investment to CFC. The money was to be put into an escrow account with other investments. This money was then to be loaned out to land developers and builders who wished to develop various real estate projects. The investor could expect periodic interest payments and the return of his initial investment at the end of the loan period. Each investor received a fractionalized interest in a promissory note and a deed of trust on the property that was being developed by the borrower. The investor retained no control over the management of his money once invested.
Defendant argues that the type of transaction described here is not an “investment contract” and, hence, is not a security under Corporations Code section 25019. He relies on People v. Davenport for the proposition that a mere expectation of interest and the right of repayment of the principal investment is not an investment contract. (People v. Davenport (1939) 13 Cal.2d 681, 690, 91 P.2d 892.) As defendant correctly points out, the investor's transaction involved a loan of money to CFC with the expectation only of interest paid on the investment and repayment of the initial investment. The transaction, however, includes the other elements of a deed of trust and a promissory note. Because of these additional elements in the transaction, People v. Davenport is not controlling.
The transactions in question are undoubtedly securities under People v. Schock, supra, 152 Cal.App.3d 379, 199 Cal.Rptr. 327. That case addressed the question of whether a fractional interest in a promissory note and related deed of trust is a security within the meaning of the Corporate Securities Law. In Schock, the defendant owned a mortgage brokerage company. Lenders were solicited through newspaper ads. Money was collected and loaned out to borrowers. The lender could expect a fixed rate of return on the investment until the loan repayment was due. The loan was secured by a deed of trust on the borrower's real property, and the borrower would execute a promissory note. (Id., at p. 383, 199 Cal.Rptr. 327.)
The Schock court held the transaction fell within the statutory definition of securities. The court noted that Davenport was still good law stating, “The mere expectation of a return on an investment, together with the right of repayment, does not—without more—subject the transaction to security regulation.” (People v. Schock, supra, at p. 386, 199 Cal.Rptr. 327.) However, the Schock court also recognized that a public offering of promissory notes repayable with interest constitutes securities within the definition of the Corporate Securities Law. (Ibid.; People v. Walberg (1968) 263 Cal.App.2d 286, 294, 69 Cal.Rptr. 457.)
In People v. Coster (1984) 151 Cal.App.3d 1188, 1193, 199 Cal.Rptr. 253, the court held, “For the purpose of both the federal and the California securities law, an investment contract means a contract or transaction whereby a person invests money in a common enterprise with the expectation of deriving a profit solely from the efforts of a promoter or a third person.”
In the present case, the investors loaned money to a common enterprise (CFC) with the expectation of deriving a profit (the payment of interest plus repayment of the loan amount) solely from the efforts of a promoter (defendant) or third persons (the borrowers from CFC).
We hold that under the Coster definition the transactions in the instant case constituted “securities.” Also, the investment package utilized by defendant here is identical to that described in People v. Schock, supra. Hence, defendant offered for sale, and sold, “securities” within the meaning of the Corporate Securities Law.
Defendant also contends that the trial court committed reversible error by instructing the jury that “․ the transactions constituting investments in the Catheys Valley property ․ the highway 140 property ․ the Modesto Lot property ․ and the Century Bowl property ․ are securities, for the purposes of these instructions and are not exempt from qualification.” Defendant argues that this instruction deprived him of his constitutional right to have the jury determine every element of the charged Corporations Code violations by relieving the prosecution's burden of proof on the security issue contrary to the due process clause of the Fourteenth Amendment. (In re Winship (1970) 397 U.S. 358, 364, 90 S.Ct. 1068, 1072, 25 L.Ed.2d 368; People v. Roder (1983) 33 Cal.3d 491, 497, 189 Cal.Rptr. 501, 658 P.2d 1302.)
California case authority has consistently held that the determination of whether a transaction is a security is a question of law. (See People v. Schock, supra, 152 Cal.App.3d 379, 385, 199 Cal.Rptr. 327.) In fact, it has been held to be entirely proper for the trial court to instruct the jury on the facts of the particular case that the transactions involved constituted securities as a matter of law. (People v. Skelton (1980) 109 Cal.App.3d 691, 712, 167 Cal.Rptr. 636; People v. Dutton (1940) 41 Cal.App.2d 866, 872–873, 107 P.2d 937.) These cases, however, do not address the issue of whether such an instruction deprives a defendant of his due process right to require the prosecution to prove each element of the charged offense beyond a reasonable doubt. The question whether the trial court committed instructional error is unresolved; however, assuming the trial court did err, the error was not prejudicial. In those cases in which instructional error is responsible for relieving or lessening the prosecution's burden of proof, the majority of courts have held that the error is judged under Chapman v. California (1967) 386 U.S. 18, 24, 87 S.Ct. 824, 828, 17 L.Ed.2d 705. (See People v. Roder, supra, 33 Cal.3d at pp. 504–505, 189 Cal.Rptr. 501, 658 P.2d 1302.)
Applying the Chapman standard to the case at hand, could any reasonable juror have found on the evidence presented that the investment transactions were not securities within the meaning of the Corporations Code?
The evidence on this issue, considered in the light of California case law discussed above, is overwhelming, essentially uncontradicted and permits but one rational conclusion—that the transactions were securities within the meaning of the Corporate Securities Law. The investors were to receive interest on their investments plus the return of the principal amount at the end of a set period. The investments were evidenced by fractionalized promissory notes to be secured by deeds of trust on the real properties to be developed with the investment proceeds. The investors had no control or management over their monies once invested.
The theory of the defense at the trial of this action was not that the investment transactions were not securities, but rather that defendant was the victim of manipulation by his business associates and of erroneous legal advice by his attorneys. Defense counsel's closing statements to the jury during his argument were as follows:
“I would submit to you that based on the evidence you have, that Mr. Holder had absolutely no intent to steal anybody's money. He was at all times relying on the advice of Mr. Grant, who was under an obligation to advise him correctly.
“He was, to a certain extent, manipulated by Richard Payton, who took what he wanted out of this corporation to both the detriment of the investors, and everybody else involved in the corporation.
“He had no intent to sell securities without them being properly qualified, he relied completely on Mr. Grant's advice. If that's not a defense, it's unfortunate. I don't think it's just, and I'll tell you that. If you go to the attorney with a security, something like this, and he misadvises you, it's not right. He should be the one on that, not Mr. Holder.
“With regard to the investors that were dealt with with the other salesmen, I don't think it's in any way fair or just to hold Mr. Holder criminally responsible for that, not when everyone is relying on the brochure and the advice of an attorney, and a real estate broker, who is a general manager of that corporation.”
We hold that even if there was instructional error as claimed by defendant, upon the facts of this case, such error would be harmless beyond a reasonable doubt.
Are the transactions exempt from regulation despite being characterized as securities?
Defendant contends the transactions are exempt from corporate securities regulations. This contention also must fail.
Corporations Code section 25110 provides that any sale or offer to sell a security must be qualified under the Corporate Securities Law unless the security or transaction is exempt. (Corp.Code, § 25110.) Defendant argues the security offered by CFC was exempt from qualification under former Corporations Code section 25100, subdivision (q). Therefore, he contends that the charges of selling an unqualified security in violation of section 25110 are unfounded.
Subdivision (q) exempted “A promissory note secured by a lien on real property, which is not one of a series of notes secured by interests in the same real property.” Defendant maintains, without citing authority, that the securities offered to four investors were exempt under subdivision (q). These investors received separate promissory notes that indicated each had a fractionalized interest in the promissory note signed by the borrower. The promissory notes were secured by deeds of trust on the same piece of real property.
Defendant's interpretation of former subdivision (q) is incorrect. People v. Schock addressed the question of whether a fractionalized interest in a promissory note was exempt from qualification under subdivision (q). The court held that in substance the fractionalized interest in a promissory note was a promissory note which was one of a series of notes. Hence, the language of subdivision (q) did not exempt the transaction. (People v. Schock, supra, 152 Cal.App.3d at pp. 389–390, 199 Cal.Rptr. 327.) The fractionalized interest in a promissory note secured by the same real property received by the four CFC investors was not exempt from regulation.
Also, if, as here, a transaction is a security under the definition of “investment contract,” it automatically must be qualified under Corporations Code section 25110. (People v. Park (1978) 87 Cal.App.3d 550, 562–563, 151 Cal.Rptr. 146.)
Is defendant's consecutive sentence on multiple convictions of grand theft prohibited by Penal Code section 654?
Defendant was convicted of twenty counts of grand theft. He was sentenced on one count to an upper term of three years, and he was sentenced on eight other counts of grand theft, the sentences to run consecutively. Sentences on the remaining convictions of theft were stayed. Defendant contends the sentences on the eight counts of theft should be stayed pursuant to Penal Code section 654. This contention lacks merit.
Penal Code section 654 provides in pertinent part: “An act or omission which is made punishable in different ways by different provisions of this Code may be punished under either of such provisions, but in no case can it be punished under more than one․” The legislative purpose of Penal Code section 654 is “to insure that a defendant's punishment will be commensurate with his culpability.” (People v. Perez (1979) 23 Cal.3d 545, 551, 153 Cal.Rptr. 40, 591 P.2d 63.) Penal Code section 654 has been held to apply to a defendant who engages in a course of conduct that violates more than one statute but is nevertheless an indivisible transaction. A course of conduct is an indivisible transaction when the defendant's commission of all the offenses was incident to one objective. If defendant, however, entertains multiple criminal objectives for each offense, he may be punished for each independent violation. (Perez, supra, at p. 551, 153 Cal.Rptr. 40, 591 P.2d 63.)
Defendant maintains that he entertained only one objective in committing each act of grand theft, to obtain money. This, however, does not mandate that the prohibition of Penal Code section 654 is applicable. The California Supreme Court has recognized on numerous occasions that the defendant who had only one objective for his acts may be punished for each act if multiple victims are involved. (Neal v. State of California (1960) 55 Cal.2d 11, 20–21, 9 Cal.Rptr. 607, 357 P.2d 839; People v. Perez, supra, 23 Cal.3d at p. 551, fn. 4, 153 Cal.Rptr. 40, 591 P.2d 63; People v. Beamon (1973) 8 Cal.3d 625, 638, fn. 10, 105 Cal.Rptr. 681, 504 P.2d 905.)
In the case at bench, defendant committed grand theft on a variety of occasions during the period between August 1980 to March or April 1981. Each occasion involved a different investor-victim. This lawsuit involved 20 counts of grand theft against 20 different victims, and several of those victims had invested money on behalf of others. The punishment of defendant in this case, consecutive sentences on eight counts of grand theft, certainly is commensurate with defendant's culpability. (See Neal v. State of California, supra, 55 Cal.2d at pp. 20–21, 9 Cal.Rptr. 607, 357 P.2d 839.)
Furthermore, defendant's professed intent, to obtain money, may not be the basis of the applicability of Penal Code section 654. The Perez court, in discussing the application of Penal Code section 654 in the context of multiple sex offenses, stated, “Assertion of a sole intent and objective to achieve sexual gratification is akin to an assertion of a desire for wealth as the sole intent and objective in committing a series of separate thefts. To accept such a broad, overriding intent and objective to preclude punishment for otherwise clearly separate offenses would violate the statute's purpose to insure that a defendant's punishment will be commensurate with his culpability.” (People v. Perez, supra, 23 Cal.3d at p. 552, 153 Cal.Rptr. 40, 591 P.2d 63.)
Defendant's overall intent to acquire money is, therefore, too broad to preclude consecutive sentencing on his convictions of separate acts of grand theft. (Perez, supra, at p. 552, 153 Cal.Rptr. 40, 591 P.2d 63; People v. Williams (1980) 106 Cal.App.3d 15, 20, 164 Cal.Rptr. 767.)
Is grand theft a necessarily included offense in Corporations Code section 25401?
Defendant contends that five convictions of grand theft must be reversed because the facts underlying the five instances of theft were also the basis of defendant's five convictions of Corporations Code section 25401. It should be noted at the outset that only four instances of grand theft are affected by this argument. In any event, defendant's contention must fail.
When a defendant is convicted of two offenses and one is a necessarily included offense of the other, the lesser offense conviction must be reversed. (People v. Wilson (1976) 62 Cal.App.3d 370, 373, 132 Cal.Rptr. 813.) A necessarily included offense may be determined by one of two tests: (1) The statutory elements of the lesser offense are necessarily included in the statutory definition of the greater offense; or (2) the language of the accusatory pleading of the greater offense encompasses all the elements of the lesser offense. (People v. Lohbauer (1981) 29 Cal.3d 364, 369, 173 Cal.Rptr. 453, 627 P.2d 183; People v. Watson (1983) 150 Cal.App.3d 313, 323, 198 Cal.Rptr. 26; People v. Wilson, supra, 62 Cal.App.3d at p. 373, 132 Cal.Rptr. 813.) Neither test is satisfied in the present case.
The statutory elements of Penal Code section 487, subdivision 1, are not included in the statutory element of Corporations Code section 25401.
Corporations Code section 25401 provides: “It is unlawful for any person to offer or sell a security in this state or buy or offer to buy a security in this state by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”
Penal Code section 484, subdivision (a), provides in pertinent part:
“Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, or who causes or procures others to report falsely of his wealth or mercantile character and by thus imposing upon any person, obtains credit and thereby fraudulently gets or obtains possession of money, or property or obtains the labor or service of another, is guilty of theft․”
At the time the criminal acts in question were committed, Penal Code section 487, subdivision 1, provided:
“When the money, labor or real or personal property taken is of a value exceeding two hundred dollars ($200); provided, that when domestic fowls, avocados, olives, citrus or deciduous fruits, nuts and artichokes are taken of a value exceeding fifty dollars ($50); provided, further, that where the money, labor, real or personal property is taken by a servant, agent or employee from his principal or employer and aggregates two hundred dollars ($200) or more in any 12 consecutive month period, then the same shall constitute grand theft.”
The statutory definitions of each crime demonstrate that grand theft is not a lesser included offense of Corporations Code section 25401. Section 25401 may be violated by a mere offer to sell a security for less than $200. Grand theft, however, may not be committed unless a person's money is actually acquired or “taken” and the money taken has exceeded $200.
The second category of included offenses is that in which the elements of the lesser offense are covered in the language of the accusatory pleading. Each count of grand theft and each count of Corporations Code section 25401 violation charged in the information is presented in the statutory language. Grand theft, therefore, is not a necessarily included offense under the accusatory pleading test. (See People v. Watson, supra, 150 Cal.App.3d at p. 321, fn. 4, 198 Cal.Rptr. 26.)
Defendant relies on People v. Gonda, which holds that grand theft is a necessarily included offense of Corporations Code section 31201. That case found grand theft a lesser included offense because the grand theft counts were “based upon the same acts” as the section 31201 counts. (People v. Gonda (1982) 138 Cal.App.3d 774, 778, 188 Cal.Rptr. 295.) This, however, is not a method by which lesser included offenses are determined. The court in Gonda did not purport to apply either of the two tests established by California case law. (See People v. Watson, supra, 150 Cal.App.3d at p. 323, 198 Cal.Rptr. 26.) Instead, the court stated:
“Appellants were convicted of both grand theft by false pretenses (Pen.Code, § 487) and unlawful sale of franchises by means of untrue statements (Corp.Code, § 31201). Yet, it is well settled that double conviction is not permitted where one offense is necessarily included in the other. [Citations.] In the present case, the seven counts of violation of section 31201 are based upon the same acts as the seven counts of grand theft by false pretenses. Appellants necessarily committed the offense of selling franchises by misrepresentations each time they committed grand theft by false pretenses upon the sale of the very same franchises. (People v. Pater [ (1968) ], supra, 267 Cal.App.2d 921, 926 [73 Cal.Rptr. 823] [joyriding and grand theft-auto].)
“The remedy where a defendant has been erroneously convicted of both the greater and the lesser crime is reversal of the offense carrying the less serious punishment.” (People v. Gonda, supra, 138 Cal.App.3d at p. 778, 188 Cal.Rptr. 295.)
The manner in which the court arrived at its conclusion is not illuminating inasmuch as the court engaged in no meaningful analysis of the necessarily included offense doctrine. The court seemingly based its decision on an evidentiary finding that “the seven counts of violation of section 31201 are based upon the same acts as the seven counts of grand theft by false pretenses.” The court made no attempt to distinguish cases such as People v. Wilson, supra, 62 Cal.App.3d 370, 132 Cal.Rptr. 813, People v. Greene (1973) 34 Cal.App.3d 622, 110 Cal.Rptr. 160, and People v. Meriweather (1968) 263 Cal.App.2d 559, 69 Cal.Rptr. 880. In Wilson, the defendant was convicted of attempted voluntary manslaughter (Pen.Code, §§ 192, subd. 1, and 664) and of assault with a deadly weapon (Pen.Code, § 245). The same acts against the same victim formed the basis of both convictions. There, as here, the defendant complained of both convictions on the ground that assault with a deadly weapon is an offense necessarily included within that of voluntary manslaughter. Employing the traditional two tests, set forth earlier in this opinion, utilized in determining whether one offense is necessarily included in another, the court answered in the negative and held the defendant properly convicted of both crimes and properly sentenced for the crime carrying the greater penalty.
In People v. Greene, supra, 34 Cal.App.3d 622, 110 Cal.Rptr. 160, the defendant was convicted of annoying and molesting a child in violation of Penal Code section 647a and of simple assault of the same child in violation of Penal Code section 240. The same identical acts formed the basis for the two convictions. Defendant asserted under Penal Code section 654 he could not be convicted of both crimes for one course of action against the same victim at one time. After demonstrating that simple assault is not a lesser included offense of annoying or molesting a child in violation of Penal Code section 647a, the court stated as follows:
“Defendant relies upon the next ensuing clause of section 654 which reads: ‘․ an acquittal or conviction and sentence under either one [of several “different provisions of this code” under which “an act or omission ․ is made punishable”] bars a prosecution for the same act or omission under any other.’ Under the provisions of section 954 of the Penal Code which regulate joinder of charges ‘․ the defendant may be convicted of any number of the offenses charged, and each offense of which the defendant is convicted must be stated in the verdict or the finding of the court; ․’ (See Kellett v. Superior Court (1966) 63 Cal.2d 822, 824–826 [48 Cal.Rptr. 366, 409 P.2d 206]; and People v. Nye [ (1951) ] supra, 38 Cal.2d 34, 39 [237 P.2d 1].) Unless the offenses are included offenses within the principle outlined above, several convictions, although not necessarily several punishments, may result in one action. The second clause does, however, serve to protect the accused from successive prosecutions for the same act or omission. (See Kellett v. Superior Court, supra, 63 Cal.2d 822, 827–828 [48 Cal.Rptr. 366, 409 P.2d 206]; and In re Benny G. (1972) 24 Cal.App.3d 371, 374–377 [101 Cal.Rptr. 28].)” (Greene, supra, at p. 655, 110 Cal.Rptr. 160.)
In People v. Meriweather, supra, defendant was convicted of attempted murder in violation of sections 664 and 187 of the Penal Code and of assault with intent to commit murder in violation of section 217 of the Penal Code. The same acts against the same victim formed the basis of the two convictions. After pointing out that attempted murder and assault with intent to commit murder are separate and distinct offenses and that the one is not included in the other, the court held the defendant was properly convicted of both crimes but could be punished only for the crime carrying the greater penalty.
In People v. Pater (1968) 267 Cal.App.2d 921, 73 Cal.Rptr. 823, cited by the Gonda court in support of its holding, the defendant was convicted of count I, grand theft-auto (Pen.Code, § 487, subd. 3) and count II, taking or driving a vehicle without the owner's consent (Veh.Code, § 10851). He was sentenced on both counts. The information charged count I to have been committed on June 8, the date of the original theft, and count II was charged to have been committed on June 12 and was based on the act of defendant in driving the stolen vehicle on the date he was arrested. The court applied the traditional tests in determining whether an offense is “necessarily included” and found that all of the elements of Vehicle Code section 10851, as then framed, were necessarily included in grand theft-auto (Pen.Code, § 487). It also found that the two counts in the information related to the same act. Based upon these findings, the court held that the conviction for the Vehicle Code section 10851 violation could not stand. The court recognized and stated the correct rule: “When a multiple punishment is involved under facts which do not encompass necessarily included offenses a conviction may stand although the punishment must be expunged. (People v. Smith (1950) 36 Cal.2d 444, 448 [224 P.2d 719].) But, as we have shown, when a necessarily included offense is involved, the conviction also must be reversed.” (People v. Pater, supra, 267 Cal.App.2d at p. 926, 73 Cal.Rptr. 823, emphasis in original.)
It is apparent, therefore, that the holding in People v. Pater does not, in fact, support the decision in People v. Gonda, supra, to the effect that an offense is “necessarily included” if based on the same acts. We decline to follow the Gonda court. To do so would be to endorse a new test for determining a “necessarily included” offense, which is not warranted by the statutory or decisional law.
In the instant case, having found that the grand theft counts are not “necessarily included” in the Corporations Code section 25401 violations, we reject defendant's contention that the convictions on counts 7, 10, 14 and 17 of the information must be reversed.
Is grand theft a necessarily included offense of Corporations Code section 25541?
Defendant contends his 20 counts of grand theft must be reversed because grand theft is a necessarily included offense of section 25541 of the Corporations Code. This contention fails for the same reason that the previous contention failed.
Corporations Code section 25541 provides:
“Any person who willfully employs, directly or indirectly, any device, scheme, or artifice to defraud in connection with the offer, purchase, or sale of any security or willfully engages, directly or indirectly, in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person in connection with the offer, purchase, or sale of any security shall upon conviction be fined not more than ten thousand dollars ($10,000) or imprisoned in the state prison, or in a county jail for not more than one year, or be punished by both such fine and imprisonment.”
The statutory elements of grand theft are not necessarily included in the statutory definition of Corporations Code section 25541. Furthermore, the information presents the charges of section 25541 in the language of the statute. Grand theft is not a necessarily included offense of Corporations Code section 25541 and the convictions may stand.
We affirm the judgment.
1. Under the recent decision in People v. Castro (1985) 38 Cal.3d 301, 211 Cal.Rptr. 719, 696 P.2d 111, the Ohio conviction would have been prima facie admissible for impeachment purposes, subject to discretionary exclusion under Evidence Code section 352.
2. Corporations Code section 25401 provides:“It is unlawful for any person to offer or sell a security in this state or buy or offer to buy a security in this state by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”
BEST, Associate Justice.
PAULINE D. HANSON, Acting P.J., and HAMLIN, J., concur.