United States v. Tehan

Decision Date19 August 1966
Docket NumberNo. 15538.,15538.
Citation365 F.2d 191
PartiesUNITED STATES of America ex rel. Edgar I. SHOTT, Jr., Relator-Appellant, v. Dan TEHAN, Sheriff of Hamilton County, Respondent-Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

Thurman Arnold, Washington, D. C., James F. Fitzpatrick, Arnold, Fortas & Porter, Washington, D. C., James G. Andrews, Jr., John A. Lloyd, Jr., Cincinnati, Ohio, of counsel, for appellant.

Calvin W. Prem, Asst. Pros. Atty., Cincinnati, Ohio, Melvin G. Rueger, Prosecuting Atty., Cincinnati, Ohio, on brief, for appellee.

Before O'SULLIVAN and CELEBREZZE, Circuit Judges, and CECIL, Senior Circuit Judge.

CELEBREZZE, Circuit Judge.

Appellant was found guilty by a jury in the Common Pleas Court of Hamilton County, Ohio on two counts of an indictment charging violation of the Ohio Securities Act, Sections 1707.01 through 1707.45, Ohio Revised Code. After exhausting his State remedies he instituted an action for a writ of habeas corpus under the provisions of 28 U.S.C. §§ 2241-2254, in the United States District Court, Southern District of Ohio, Western Division alleging violation of due process, guaranteed by the Fourteenth Amendment. The District Court dismissed Appellant's petition for a writ of habeas corpus and appeal was taken to this Court. On November 14, 1964, this Court, relying on Malloy v. Hogan, 378 U.S. 1, 84 S.Ct. 1489, 12 L.Ed.2d 653 (1964), reversed the District Court and granted Appellant's writ, holding that comment in his argument to the jury by a State prosecuting attorney on Appellant's failure to take the stand, violated the Fifth Amendment to the Constitution of the United States which was protected against abridgment by the States by the Fourteenth Amendment. United States ex rel. Shott v. Tehan, 337 F.2d 990 (C.A. 6, 1964). The Supreme Court later in Griffin v. State of California, 380 U.S 609, 85 S.Ct. 1229, 14 L.Ed.2d 106 (1965) ruled to the same effect as our opinion in Shott. Thereafter the Supreme Court granted certiorari in Shott, and affirmed this Court's holding that the prosecutor's comment violated Shott's constitutional rights. However, this Court's order was vacated on the ground that Griffin should not be applied retroactively except to pending criminal cases, and held that an application for a writ of habeas corpus pending at the time Griffin was decided, was not a pending criminal case. Tehan v. United States ex rel. Shott, 382 U.S. 406, 86 S.Ct. 459, 15 L.Ed.2d 453 (1966). The Supreme Court remanded the case to this Court for consideration of other claims contained in Appellant's petition for writ of habeas corpus which this Court had not considered.

Appellant is a member of the Bar of the State of Ohio, and a partner in the Shott Investment Company, located in Cincinnati, Ohio. On the 28th day of September, 1960, he issued to one Patrick Sestito a promissory note in the sum of $2250.00 which represented principal in the sum of $2000.00, and interest in the sum of $250.00, payable sixty days after date endorsed "Shott Investment Company by Edgar I. Shott, Jr."1 Appellant at the time of issuance of this note was not licensed as a security dealer. He was indicted by the Grand Jury of Hamilton County, and charged with (1) selling securities without having been licensed as a security dealer, and (2) selling an unlicensed security.

The two-count indictment, under which the Appellant was charged, tried and convicted, was based upon the provisions of Ohio Revised Code Section 1707.44(A) and (C).2

It is to be noted that Section 1707.44 (C) uses the words "any security" in its prohibitory language, and Section 1707.44(A) prohibits (1) engaging in the business of acting as a broker for others (2) selling securities or offering them for sale, or (3) engaging in the business of buying, selling or dealing in securities otherwise than through a licensed dealer.

Appellant contends that the Ohio Securities Act, under which he was convicted, is invalid under the due process clause of the Fourteenth Amendment because the procedural provisions create an evidentiary presumption that Appellant made an unlawful public offering of his promissory note and further shifted to the Appellant the burden of proving his innocence.

Appellant, in his attempt to establish that the Ohio Securities Act violates the due process clause of the Fourteenth Amendment, relies mainly on Yee Hem v. United States, 268 U.S. 178, 45 S.Ct. 470, 69 L.Ed. 904 (1925); Casey v. United States, 276 U.S. 413, 48 S.Ct. 373, 72 L.Ed. 632 (1928); Morrison v. People of State of California, 291 U.S. 82, 54 S.Ct. 281, 78 L.Ed. 664 (1934); Tot v. United States, 319 U.S. 463, 63 S.Ct. 1241, 87 L.Ed. 1519 (1943); Speiser v. Randall, 357 U.S. 513, 78 S.Ct. 1332, 2 L.Ed.2d 1460 (1958) and United States v. Romano, 382 U.S. 136, 86 S.Ct. 279, 15 L. Ed.2d 210 (1965).

These cases set forth the law governing statutory presumptions and the constitutional validity of shifting the burden of proof to the defendant. We concede that the Fourteenth and Fifth Amendments set limits upon the legislature to make proof of one fact, or groups of facts, proof of the ultimate fact upon which guilt is predicated. In the instant case we find that the shifting to the Appellant of the burden of proving by a preponderance of the evidence the exempt status of the promissory note does not fall within the factual basis of the cases relied upon by Appellant, and is not unreasonable, nor does it offend any principle of justice, nor does it constitute a denial of due process of law.

The Ohio Securities Act, Ohio Revised Code Section 1707.01, encompasses promissory notes within the definition of securities subject to the Act. It provides in Section 1707.02(G) that commercial paper and promissory notes are exempt when they are not offered directly or indirectly for sale to the public. Section 1707.453 places upon the Appellant the burden of claiming the benefits of Section 1707.02(G).

Where an individual or corporation engages in occupations in which the public has an interest, that occupation may be regulated under the police power of the State. Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940 (1934). The power of the State to provide for the general welfare authorizes it to establish such regulations as will secure or tend to secure the people against ignorance often due from an incomplete disclosure of facts by one in the unique position to know the facts. The Ohio Securities Act, commonly referred to as Ohio Blue Sky Law, was adopted to prevent fraudulent exploitations through the sale of securities. The constitutional validity of the Ohio Securities Act regulating the sale of all securities has been upheld in Hall v. Geiger-Jones Company, 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480 (1916). We believe the provisions of Ohio Revised Code Section 1707.44 regulating the sale of all securities unless specifically exempted, and the provision of Ohio Revised Code Section 1707.45 which places the burden upon the defendant to show that securities are sold under such circumstances as to bring the sale within one of the exemptions provided by the Act, are constitutionally within the police power of the State of Ohio.

Provisions similar to Ohio Revised Code Section 1707.45 are found in most State securities acts. Loss and Cowett, Blue Sky Law, Little, Brown & Company, 1958 Ed., Section 403, page 381. See also Uniform Securities Act, Section 402(d).

The validity of this Section has been affirmed by State courts on previous occasions and courts have upheld the shifting of the burden of proof even in the absence of specific statutory language. Kreutzer v. Westfahl, 187 Wis. 463, 204 N.W. 595 (1925); State v. Voorhies, 169 La. 626, 125 So. 737 (1930); Commonwealth v. Freed, 106 Pa.Super. 529, 162 A. 679 (1932); Nelson v. State, 355 P.2d 413 (Okl.Cr.1960); Catterlin v. State, 16 Ohio Law Abst. 410 (1939), appeal dismissed for want of substantial federal question, 128 Ohio St. 110, 190 N.E. 578; 292 U.S. 614, 54 S.Ct. 868, 78 L.Ed. 1473, citing Morrison v. People of State of California, 291 U.S. 82, 88-91, 54 S.Ct. 281, 78 L.Ed. 664; Casey v. United States, 276 U.S. 413, 418, 48 S.Ct. 373, 72 L.Ed. 632; Mugler v. State of Kansas, 123 U.S. 623, 674, 8 S.Ct. 273, 31 L.Ed. 205. See also Loss, Securities Regulations, Little, Brown & Co., 2 Ed. 1961, Vol. 1, page 712; C. C. H. Blue Sky Law Reporter, Paragraph 3765.

In Catterlin v. State, supra, the court held the legislature had the power to declare the sale of securities without a license was unlawful, and that the legislature further had the right to place on persons accused of violating the Blue Sky Law the burden of proving the sales made by them were within the exemptions on which they relied. In dismissing the appeal for lack of federal question, the Supreme Court cited Morrison v. People of State of California, supra, and Casey v. United States, supra. Turning to Morrison v. People of State of California, supra, Mr. Justice Cardozo made these pertinent statements:

"The decisions are manifold that within limits of reason and fairness the burden of proof may be lifted from the state in criminal prosecutions and cast on a defendant. The limits are in substance these, that the state shall have proved enough to make it just for the defendant to be required to repel what has been proved with excuse or explanation, or at least that upon a balancing of convenience or of the opportunities for knowledge the shifting of the burden will be found to be an aid to the accuser without subjecting the accused to hardship or oppression. * * *
"`It is not within the province of a legislature to declare an individual guilty or presumptively guilty of a crime (citation omitted).\' * * * There are, indeed, `presumptions that are not evidence in a proper sense but simply regulations of the burden of proof.\' Casey v. United States, supra. Even so, the occasions that justify regulations of the one
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