People v. Figueroa

Decision Date07 April 1986
Citation41 Cal.3d 714,224 Cal.Rptr. 719,715 P.2d 680
CourtCalifornia Supreme Court
Parties, 715 P.2d 680, Blue Sky L. Rep. P 72,386 The PEOPLE, Plaintiff and Respondent, v. Joseph C. FIGUEROA et al., Defendants and Appellants. Crim. 24252.

Mark D. Greenberg and Manuel E. Nestle, Berkeley under appointment by the Supreme Court, for defendants and appellants.

John K. Van de Kamp, Atty. Gen., Edward P. O'Brien, Asst. Atty. Gen., Derald E. Granberg and Robert R. Granucci, Deputy Attys. Gen., San Francisco, for plaintiff and respondent.

BIRD, Chief Justice.

The principal question presented by this appeal is whether the trial court, in a prosecution for the sale of unqualified securities, erred in instructing the jury that certain "Corporation Promissory Notes" were "securities" within the meaning of the Corporate Securities Law. (Corp.Code, § 25000 et seq. 1 )

I.

Joseph and Dennis Figueroa appeal from a judgment of conviction for one count of selling unqualified securities. ( §§ 25110, 25540.) The jury deadlocked on thirteen additional counts, eight alleged against Joseph and five against Dennis. Thereafter, a mistrial was declared on those counts, and they were dismissed with the understanding that they could be considered by the court for restitution purposes. Both appellants were given terms of probation with conditions including restitution, a suspended county jail term, and community service.

Only the facts relating to the count on which appellants were convicted are relevant to this appeal.

In mid-March of 1979, Arlo Kurrle responded to an advertisement which had appeared in the San Jose Mercury News. The ad stated "Solar & Energy Business. Partner wanted with $7,000 or more. Active or nonactive." Kurrle called one of the two phone numbers listed in the ad and spoke to Joseph Figueroa, who described an existing insulation business and his desire to expand into solar energy.

Kurrle met Joseph and his son, Dennis, the following day. The Figueroas told Kurrle about Figueroa Insulation & Energy Co., Inc. (Insulation) of which Dennis was president. The new solar energy business would also be a corporation. Kurrle learned about two other businesses, Figueroa Financial Insurance Services, Inc. (Insurance) and Figueroa Business & Financial Consultants (Financial).

Joseph and Dennis proposed that Kurrle invest $10,000 in their business. The money was to be used for the purchase of insulation equipment and the installation of telephones used to solicit loan customers.

At the first meeting, Kurrle and Joseph discussed whether Kurrle was to be active in the business. Kurrle expressed interest in having a direct role, possibly in the sales or management areas.

A few days later, Kurrle called Joseph and agreed to lend the company $10,000. There was no discussion about what form Kurrle's investment would take, but Kurrle "was thinking in terms of a loan ... that would be documented." During the conversation, Joseph told Kurrle that he would be an officer in one of the Figueroa corporations.

Over the next four weeks, Kurrle paid the money to the Figueroas in five separate installments evidenced by five 2-year notes. 2 The notes were to earn 10 percent interest annually. Kurrle had the option to take payment in cash or shares of the company. The fourth loan installment, for $2,500, constituted the basis for the charge on which the Figueroas were eventually convicted. 3 Kurrle made that loan by giving the Figueroas a check payable to Dennis. The loan was witnessed by a "Corporation Promissory Note" from Insulation which was signed by Dennis. In relevant part it stated:

"April 27th, 1979

CORPORATION PROMISSAROY [sic] NOTE

$2,500.00

FOR THE VALUE RECEIVED, ON OR BEFORE 24 months after date, without grace The Figueroa Insulation & Energy Company, Inc., promises to pay to the order of Mr. Arlo Kurrle, of San Jose, California or at his home or office. [p] The sum of $2,500 two thousand dollars & Five Hundred at the rate of 10% per Cent annum until paid.... [p] ... Its [sic ] agreed and understood, that this corporation note is all due an [sic ] payable in 24 months from date of this note and its [sic ] further agreed and understood, that interest is to be paid annual [sic ] each year, but all due and payable April 27th, 1981...."

Kurrle began working in the Figueroa office sometime in early April, shortly after making the first loan installment. He was made secretary/treasurer of Financial and Insulation and worked primarily for Joseph and Financial, updating loan source lists and contacting potential lenders. He also accompanied Dennis on sales calls for Insulation and developed a demonstration kit used by Dennis in his presentations. Kurrle stayed with the business for about four months. Although the trial testimony does not indicate whether he was ever repaid, the probation report and restitution order strongly suggest that he was not.

II.

The first claim raised by appellants is that the trial court committed reversible error by failing to specify in its instructions what burden of proof must be met to establish that the sale was exempted from qualification. Since Justice King's opinion in the Court of Appeal correctly analyzes and resolves this issue, this court adopts that part of his opinion as its own.

It is noteworthy that the Attorney General concedes that the Court of Appeal's resolution of this issue is correct and that the judgment of conviction must be reversed on this basis. With appropriate deletions and additions, * that analysis follows:

[Section 25110 makes it unlawful "for any person to offer or sell in this state any security in an issuer transaction ... unless such sale has been qualified under section 25111, 25112 or 25113 ... or unless such security or transaction is exempted under Chapter 1 (commencing with Section 25100) of this part." (Emphasis added.) Sections 25100 through 25105 specify securities and transactions which are exempted from qualification under the Corporate Securities Law. The statute upon which appellants relied was section 25102, subdivision (e), which exempts from the provisions of section 25110 "[a]ny offer or sale of any evidence of indebtedness, whether secured or unsecured, and any guarantee thereof, in a transaction not involving any public offering." (Emphasis added.) ]

[p] Section 25163 provides "[i]n any proceeding under [the Corporate Securities Law], the burden of proving an exemption or an exception from a definition is upon the person claiming it." Since appellants claimed they came within a private offering exemption to section 25110, they bore the burden of proving [that fact]. (See People v. Park (1978) 87 Cal.App.3d 550, 566-567, 151 Cal.Rptr. 146 [state did not bear burden of proving lack of private offering exemption in prosecution under section 25110]; People v. Murphy (1936) 17 Cal.App.2d 575, 585-586, 62 P.2d 592.) Joseph's proposed instruction therefore was partially erroneous, as it placed the burden on the state to disprove any exemptions.[ 4 [The trial court properly placed] this burden of proof on the Figueroas, but [did] not define the quantum or degree of that burden.

The court is required to instruct the jury on both the assignment and the magnitude of burdens of proof. (Evid.Code, § 502.) Section 502 presents four degrees of burdens of proof: "that a party raise a reasonable doubt concerning the existence or nonexistence of a fact or that he establish the existence or nonexistence of a fact by a preponderance of the evidence, by clear and convincing proof[,] or by proof beyond a reasonable doubt." Evidence Code section 501 provides "[i]nsofar as any statute, except section 522, assigns the burden of proof in a criminal action, such statute is subject to Penal Code section 1096." [ 5 The Law Revision Commission comment on Evidence Code section 501 notes that "where a statute allocates the burden of proof to the defendant on any [issue other than insanity] relating to the defendant's guilt, the defendant's burden ... is merely to raise a reasonable doubt as to his guilt."

The issue of the defendant's precise burden of proving he or she comes within an exemption to the securities registration law is one of first impression in California.[ 6 In People v. Tewksbury (1976) 15 Cal.3d 953, 127 Cal.Rptr. 135, 544 P.2d 1335, [this] court discussed the degrees of burdens of proof which may be placed on a defendant in a criminal case. "[W]hen there is placed upon an accused the burden of interjecting a factual contention which, if established would tend to overcome or negate proof of any element of the crime charged as otherwise established by the People, the accused need only raise a reasonable doubt as to the existence or nonexistence of the fact in issue." (Id., at p. 963, 127 Cal.Rptr. 135, 544 P.2d 1335.) Examples of such instances include unconsciousness and alibi defenses. ( [Ibid.] ) On the other hand, defendants may be required to prove by a preponderance of the evidence defenses "which raise factual issues collateral to the question of the accused's guilt or innocence and do not bear directly on any link in the chain of proof of any element of the crime." (Id., at p. 964, 127 Cal.Rptr. 135, 544 P.2d 1335.) Among such instances are entrapment defenses and challenges to testimony as being hearsay or that of an accomplice. (Id., at pp. 964-968, 127 Cal.Rptr. 135, 544 P.2d 1335.)

Jefferson's Evidence Benchbook makes a similar distinction on the defendant's burden of proof. "On any issue of defendant's guilt that is in the nature of an affirmative defense, the burden of proof assigned to defendant shall be merely to raise a reasonable doubt as to his guilt; ... [o]n a guilt issue other than whether defendant committed the criminal acts charged, the burden of proof assigned to defendant may be fixed at proof by a preponderance of the evidence." (2 Jefferson, Cal.Evidence Benchbook (2d ed. 1982) § 45.1, p. 1640.)

An...

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