U.S. v. Johnson

• Decision Date: 25 October 1983
• Docket Number: No. 82-1136,82-1136
• Citation: 718 F.2d 1317
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. William J. JOHNSON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1317

718 F.2d 1317

UNITED STATES of America, Plaintiff-Appellee, v. William J. JOHNSON, Defendant-Appellant.

No. 82-1136.

United States Court of Appeals Fifth Circuit.

Oct. 25, 1983.

Leo J. Hoffman, Court appointed, Dallas, Tex., for defendant-appellant.

James A. Rolfe, U.S. Atty., John Mitchell Nevins, Asst. U.S. Atty., Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before CLARK, Chief Judge, BROWN, GEE, RUBIN, REAVLEY, POLITZ, RANDALL, TATE, JOHNSON, WILLIAMS, GARWOOD, JOLLY and HIGGINBOTHAM, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

We granted rehearing en banc to decide whether a district court may, in a criminal prosecution for interstate transportation of a falsely made security, instruct the jury that a particular document is a security as a matter of law. We hold that, although it is the court's duty to instruct the jury on the legal principles applicable to the determination of that question, it is the jury's exclusive province to apply the law to the facts and determine whether the document is a security. Accordingly, we reverse the defendant's conviction for violating 18 U.S.C. Sec. 2314 (1976). We affirm his conviction for violating 18 U.S.C. Sec. 1343 (1976) because that charge did not require proof that the document was a security.

I.

In 1977 William J. Johnson, the defendant, joined in promoting the formation of a California corporation, International Vaults, Ltd. (International), to engage in trading gold and other precious metals. Johnson left the company in 1978 because he was having marital difficulties. Thereafter, between April and November 1980, International offered investors "promissory certificates," advertising a return of 8 percent monthly. It planned to use the funds raised to buy gold directly from Alaskan miners for resale in the commercial market, hoping that it could buy and sell rapidly enough to net revenues sufficient both to pay investors the grand return it promised them and to make a profit. The certificates were not registered as securities with the state or federal government.

In mid-November 1980, International stopped selling the certificates because its attorney advised the company that it might be violating federal securities law. The lawyer advised International to undertake a public stock offering, which required the company to prepare a certified financial statement. International's officers, therefore, hired an accountant and an independent auditor to verify the company's assets. At that time or soon thereafter, the California Department of Corporations asked International to suspend operations pending an investigation of the corporation's compliance with state securities laws.

One of the corporation's major assets was an unpaid promissory note for $8 million made by its agent, Eastman, who had been buying the Alaskan gold. Because Eastman could not be located, the verification process fell behind schedule and management's concern about the Department of Corporations' investigation heightened. They hired Johnson to verify the company's assets, satisfy state officials, and enable International to resume business.

Johnson's first mission was to obtain an asset worth $8 million to substantiate International's net worth while it sought payment from Eastman on the promissory note. To this end, he travelled to Dallas to meet with William Brinlee, an acquaintance who dabbled in investments. Brinlee supplied Johnson with a document titled "Gold Certificate Contract," the full text of which is set forth in the margin, purporting to instruct that 17,000 ounces of gold held in a bonded warehouse be delivered to "Int. Vaults, Ltd./William J. Johnson." ¹ The original document did not state the price to be paid for the gold on delivery. Brinlee retained a duplicate on which Johnson had written: "To be paid in cash upon delivery of Gold." Johnson allegedly promised Brinlee that he would return the original certificate within three days and pay $75,000 for its use during that period.

Johnson travelled by plane from Dallas to California with the document. International's officers immediately presented it to the auditors, representing that the $8 million promissory note had been "retired" and that the Gold Certificate confirmed the existence of a corporate asset in that amount. The auditors attempted to verify the value of the certificate and, in the process, made telephone calls to Dallas. They were, however, unable to verify the existence of the gold the certificate represented, so they could not complete the audit.

Johnson, concerned at the suggestion that the certificate was "no good," returned to Dallas. He met with Brinlee and returned to California with a "bill of sale" for one million tons of coal. The auditors again made inquiries but could not verify the value of this asset. In short order, International declared bankruptcy.

The federal government then charged Johnson with two counts of fraud. Count One alleged that Johnson "knowingly, wilfully and with unlawful and fraudulent intent, did transport and cause to be transported in interstate commerce ... a falsely made security, that is, a gold certificate contract ... knowing such security to be falsely made. A violation of [18 U.S.C. Sec.] 2314." Count Two charged that Johnson: "for the purpose of executing [a] scheme [to defraud by means of false and fraudulent pretenses] ... knowingly and willfully caused to be transmitted in interstate commerce, wire signals, to wit: a long distance telephone conversation.... A violation of [18 U.S.C. Sec.] 1343."

One of Johnson's defenses to Count One was that the Gold Certificate Contract was not a security. The district judge instructed the jury that the prosecution had to prove as an essential element of the offense that Johnson carried a falsely made security in interstate commerce. However, he refused to submit to the jurors the question whether the Gold Certificate was such a security, instructing them that the certificate was a security as a matter of law. ² The jury found Johnson guilty on both counts. The judge sentenced him to serve thirty months on the interstate transportation count and five years' probation on the wire signal count.

The panel opinion affirmed the judgment of conviction. 700 F.2d 163 (5th Cir.1983), reh'g granted, 700 F.2d at 181 (5th Cir.1983) (en banc).

II.

By the time the Constitution was drafted, the institution of trial by jury in criminal cases had been in existence in England for several centuries. ³ It was guaranteed in the constitutions of each of the original thirteen states, ⁴ and was considered " 'part of that admirable common law which had fenced around and interposed barriers on every side against the approaches of arbitrary power.' " ⁵ The body of the Constitution itself commands that "the Trial of all Crimes, except in Cases of Impeachment, shall be by Jury." U.S. Const. art. III, Sec. 2. The sixth amendment elaborates this assurance, guaranteeing the accused in all criminal prosecutions the right to a speedy and public trial by an impartial jury. These provisions "reflect a fundamental decision about the exercise of official power--a reluctance to entrust plenary powers over the life and liberty of the citizen to one judge or to a group of judges." Duncan v. Louisiana, 391 U.S. 145, 156, 88 S.Ct. 1444, 1451, 20 L.Ed.2d 491, 500 (1968).

The sixth amendment guarantees "a trial by jury as understood and applied at common law, and includes all the essential elements as they were recognized in this country and England when the Constitution was adopted...." ⁶ The test is not entirely historical, for our inquiries "must focus upon the function served by the jury in contemporary society." ⁷

The fifth and fourteenth amendment guarantees of due process of law afford further guarantees to the accused. The due process clause "protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he is charged." ⁸ This means that the prosecution must prove beyond a reasonable doubt the defendant's guilt of "every

                element of the charged offense." 9   Therefore, "a judge may not direct a verdict of guilty no matter how conclusive the evidence."    Connecticut v. Johnson, --- U.S. ----, ----, 103 S.Ct. 969, 976, 74 L.Ed.2d 823, 832 (1983) (plurality opinion) (quoting United Brotherhood of Carpenters & Joiners v. United States, 330 U.S. 395, 408, 67 S.Ct. 775, 782, 91 L.Ed. 973, 985 (1947)).  The plurality opinion in Connecticut v. Johnson, rendered only months ago, reiterated the Court's "consistent" holding that a trial judge is prohibited from directing the jury to come forward with a verdict of conviction.    Johnson, --- U.S. at ----, 103 S.Ct. at 976, 74 L.Ed.2d at 832 (plurality opinion)
                

III.

The government argues that the judge in this case acted properly because the trial judge decides "questions of law" while the jury decides only "questions of fact." ¹⁰ This distinction is at best elusive. ¹¹ There is no categorical distinction between "legal" and "factual" questions, for in every case application of a legal principle turns on the presence of particular facts. ¹² A contemporary author has aptly explained why the "law" and "fact" distinction misses the mark in criminal trials.

There is considerable misunderstanding in the minds of the general public regarding provisions making a jury the judge of fact and not of law. This misunderstanding is attributable in large part to the inaccuracy of the general rule that juries decide only the facts. This is an inaccurate expression because it leaves the impression that juries are not judges of the law at any time or in any sense. Juries are always judges of the law in the sense that juries must pass on the manner and the extent in which the law expounded by the judge fits the facts brought out in the evidence. This process...