People v. Cook

Citation279 N.W.2d 579,89 Mich.App. 72
Decision Date19 March 1979
Docket NumberDocket No. 77-2646
Parties, Blue Sky L. Rep. P 71,504 PEOPLE of the State of Michigan, Plaintiff-Appellee, v. C. Eugene COOK, Defendant-Appellant.
CourtCourt of Appeal of Michigan (US)

Basinger & Himelrick, P. C., Scottsdale, Ariz., Reid & Reid, P. C. by Lawrence J. Emery, Lansing, for defendant-appellant.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., by Thomas C. Nelson, Pros. Attys. Appellate Service, for plaintiff-appellee.

Before CYNAR, P. J., and R. B. BURNS and BREIGHNER, * JJ.

BREIGHNER, Judge.

Defendant was charged with seven violations of the Michigan Uniform Securities Act, M.C.L. § 451.501 Et seq.; M.S.A. § 19.776(101) Et seq. The information also charged one count of obtaining money under false pretenses, M.C.L. § 750.218; M.S.A. § 28.415. After a bench trial, defendant was convicted of the false pretenses charge and two of the securities charges. The court sentenced him to 23 days incarceration and fined him $4,750. Defendant appeals as of right. We affirm in part and reverse in part.

The three guilty verdicts involved a bond transaction between defendant and Winifred G. LaFever. The bond transaction was one in a series of business transactions between defendant and Mrs. LaFever during a period from May to September, 1974.

Prior to 1974, defendant had been a registered stockbroker in this state. From 1963 to 1969, he acted as a stockbroker for Mrs. LaFever and her husband. After the death of her husband in 1969, Mrs. LaFever continued to contact defendant regarding her investments. She relied on his advice in buying and selling shares of stock.

In 1973, defendant moved to Arizona and incorporated an investment firm, dealing in precious metals. Before leaving Michigan, he notified Mrs. LaFever he would no longer manage her portfolio.

In late 1973 or early 1974, defendant began to solicit Mrs. LaFever to purchase gold and silver. The first conversation with her was mostly social. In subsequent conversations, defendant suggested the purchase of gold and silver coins to hedge against loss of security value. To finance the purchase of coins he discussed sale of shares of stock held by Mrs. LaFever.

Mrs. LaFever decided to liquidate some of her investments and purchase coins from defendant. Following defendant's instructions, stock certificates, secured from her New York stockbroker, were forwarded to defendant with authority to sell. Proceeds of sale went into Mrs. LaFever's account with defendant and were used to purchase foreign coins at a high markup.

As more coins were purchased from stock sales, Mrs. LaFever told defendant she needed to earn some income from her assets. Defendant offered to explore the acquisition of an appropriate municipal bond. Subsequently, defendant recommended purchase of a $5,000 Puerto Rican Telephone Authority bond. Mrs. LaFever agreed to the purchase.

Defendant purchased five Puerto Rican municipal bonds in his firm's name. The combined face value of the bonds was $5,000. Their cost to defendant was $5,192. Defendant billed Mrs. LaFever $5,750.

Upon receiving the price statement Mrs. LaFever called defendant and asked why it cost her $5,750 for a $5,000 bond. "He assured", she testified, "that there was a lot of paperwork and it was hard to get". She also stated defendant did not tell her what part of the total price was his "fee", but he "probably" characterized the "size of the fee" as " 'a percent' or 'a small amount' ". Defendant disclaimed representations as to commissions on the bond transaction. He testified the bonds were sold on a dealer-principal basis.

Defendant's percentage markup on bonds sold Mrs. LaFever was 10.7. The state's expert testified a normal markup on such bonds was less than five percent, 1 but industry rules 2 did not require markup disclosure. Defendant's expert said a markup of even 11 percent could not be considered excessive without knowledge of other factors attending the transaction, especially an isolated transaction.

Defendant testified he bought the bonds "short" and the markup reflected his risk. The state's expert testified the price of the subject bonds fluctuated in a narrow range during the month in question. In his argument to the court, the prosecutor pointed out defendant charged the same price for bonds held for 12 or 13 days as for bonds held two days.

Regarding the difficulty in obtaining the bonds, evidence showed they were obtainable from a broker with whom Mrs. LaFever had an account.

One count of the information against defendant charged wilful failure to disclose material facts and engaging in a course of business which operated as a fraud "in connection with the offer to sell and sale by him of a security". Another count charged him with wilful fraud as an investment advisor. A third count charged that defendant, with intent to defraud, falsely represented he was a licensed securities agent in Michigan; that he would locate an appropriate bond for Mrs. LaFever and sell it to her at the current market price plus a small commission; and that the purchase price of the bond was based on difficulty in acquiring it.

Defendant was found guilty on these three counts. He was acquitted on five others charging fraud and deceit in connection with the coin sales and violations of certain registration requirements.

The trial court's findings are conclusory. With regard to the securities counts, the court stated it found each ultimate fact necessary to sustain a conviction. It did not reveal the basis for each finding. 3 With regard to the false pretenses count, the court stated its findings with more specificity by repeating language of the information. The court found defendant had "falsely represented and pretended that he was a securities agent authorized in Michigan * * * (and) that he would locate * * * an appropriate municipal bond for said Winifred G. LaFever to purchase at the then existing current market price plus a small commission".

Defendant's appeal raises an issue as to the sufficiency of the trial court's findings of fact. It also presents questions concerning the validity of the trial court's findings of fact and conclusions of law with respect to each of the defendant's three convictions.

Sufficiency of the Findings of Fact

Rule 517.1 of the Michigan Court Rules imposes two distinct duties upon a trial court sitting without a jury. The court must make a sufficient statement of its findings of fact and must not make findings of fact that are clearly erroneous. Failure to satisfy the first obligation necessitates remand for further findings. Any finding of fact that is clearly erroneous may be set aside on appeal. As stated above, the present appeal challenges both the sufficiency of the lower court's fact findings and the validity of certain findings made. This part of the opinion discusses the sufficiency issue only.

Defendant claims his case must be remanded because the trial court's conclusory statement of facts fails to disclose key factual determinations which caused the court to convict. We agree the court's findings on their face are conclusory. There is, however, no need to remand for a more detailed statement.

The purpose of requiring a trial court to "find the facts specially" is to facilitate appellate review. People v. Jackson, 390 Mich. 621, 212 N.W.2d 918 (1973). "Findings of fact in a nonjury case serve a function paralleling the judge's charge in a jury case, that of revealing the law applied by the fact finder." Id., 627, 212 N.W.2d 921. A case will not be remanded for further findings of fact unless a remand would serve the purposes of the court rule. People v. Jackson, 81 Mich.App. 18, 264 N.W.2d 101 (1978).

It follows that findings of fact cannot be judged sufficient or insufficient on their face. But see, 2 Honigman & Hawkins, Michigan Court Rules Annotated, pp. 593-595. They must be judged in the context of specific legal and factual issues raised by the parties and the evidence. See People v. Jackson, Supra, 390 Mich. at 627, fn. 3, 212 N.W.2d 918. Compare, E. g., People v. Green, 32 Mich.App. 482, 189 N.W.2d 122 (1971), and People v. Scott, 21 Mich.App. 217, 175 N.W.2d 312 (1970), with People v. Bedford,78 Mich.App. 696, 260 N.W.2d 864 (1977), and People v. Stanford, 68 Mich.App. 168, 242 N.W.2d 56 (1976). In that context this Court has even upheld a general verdict of guilty by a court sitting without a jury. People v. Jackson, Supra.

There is no purpose in remanding this case for further findings of fact. Some of the arguments made by defendant have no evidentiary predicate. In reviewing the other issues raised by defendant which are supported by the evidence, we have not reached a point in our analysis where there is considerable doubt about the law applied by the trial court.

Defendant's Conviction for Securities Fraud in Connection

with the Offer and Sale of a Security.

The Michigan Uniform Securities Act is based upon the Uniform Securities Act. Section 101 of the statute provides in pertinent part:

"It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly:

"(2) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.

"(3) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person." M.C.L. § 451.501; M.S.A. § 19.776(101).

Section 409 of the act makes criminal any wilful violation of Section 101. See M.C.L. § 451.809; M.S.A. § 19.776(409).

Defendant claims his conviction under section 101 must be reversed for two reasons. First, he argues there was no duty to disclose the markup on Puerto Rican bonds sold Mrs. LaFever. He further contends that the trial court's conclusory...

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