People v. Lynam

• Decision Date: 23 April 1968
• Docket Number: Cr. 3116
• Citation: 68 Cal.Rptr. 202,261 Cal.App.2d 490
• Parties: The PEOPLE of the State of California, Plaintiff and Respondent, v. George LYNAM and Josephine Offley, Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

Page 202

68 Cal.Rptr. 202

261 Cal.App.2d 490

The PEOPLE of the State of California, Plaintiff and Respondent, v. George LYNAM and Josephine Offley, Defendants and Appellants.

Cr. 3116.

Court of Appeal, Fourth District, Division 2, California.

April 23, 1968.

Hearing Denied June 19, 1968.

[261 Cal.App.2d 493] Jerrell Babb, Los Angeles, for defendants and appellants.

Thomas C. Lynch, Atty. Gen., William E. James, Asst. Atty. Gen., H. Warren Siegel, Deputy Atty. Gen., for plaintiff and respondent.

OPINION

TAMURA, Associate Justice.

Following a jury trial defendants Lynam, Offley and Dunham were found guilty of conspiracy to commit grand theft and three courts of grand theft. Imposition of sentence was suspended and defendants were placed on probation subject to conditions. ¹ Defendants Lynam and Offley appeal from the orders granting probation.

The indictment arose out of alleged misrepresentations made by defendants in the sale of trust indentures known as 'Pure Trust Family Circle Organization.' (Pure Trust) The conspiracy count charged six overt acts, five involving sales of Pure Trusts and one involving an attempt to induce an attorney to render legal services to purchasers of the trust. The three grand theft counts charged defendants with obtaining money by false pretenses from the Peels ($2,100), the Dovers ($3,000), and the Robinsons ($7,600).

The evidence may be summarized as follows:

Defendant Lynam was the manager and co-trustee of Estate Organization Service; defendant Offley was a co-trustee and secretary-treasurer of the entity; and defendant Dunham was an accountant employed by the organization. In order to promote the sale of Pure Trusts, Lynam prepared and distributed pamphlets extolling the benefits to be derived through the use of the Pure Trust device, including representations that the creator of the trust could control the future of his estate as he desired while maintaining it as a 'living estate' for his family and that the trust would avoid probate and court costs, eliminate estate and inheritance taxes and avoid personal liability.

In early 1966 a copy of the pamphlet distributed by Estate Organization Services came to the attention of Mr. Wadsworth, an insurance agent in Hemet. He contacted Lynam whose name and address were stamped on the pamphlet and as a result defendants came out to Hemet and held several meetings with Wadsworth. During the meetings Lynam orally made the representations contained in the pamphlet; namely, that the creator would avoid personal liability and that if the trust were 'set up properly' in would avoid estate and inheritance taxes. In reliance upon the representations, Wadsworth purchased a Pure Trust for $1,000 on February 7, 1966. In addition he agreed to refer defendants to others in the area who might be interested with the understanding that he would be paid a 20 percent commission. Lynam furnished Wadsworth with additional copies of the pamphlet which he distributed among his insurance clients and friends in the Hemet area.

Wadsworth's leads resulted in the sales on which the three grand theft counts were based; namely, to the Peels on April 1, 1966, the Dovers on April 11, 1966, and the Robinsons on March 30, 1966. They all testified that they became interested in the Pure Trust through the pamphlets they received from Wadsworth, that prior to the purchases defendants came to their homes, that Lynam orally made the representations contained in the pamphlets, and that in reliance upon the representations they purchased the trust indentures. The Dovers paid $3,000 down on a purchase price of $6,100 but refused to pay the balance after being contacted by a representative of the Attorney General's office; the Peels paid the total agreed price of $2,100; the Robinsons paid the total agreed price of $7,600.

In addition, defendants made a sale to Mr. and Mrs. Hansen on April 21, 1966, and a sale to Mr. and Mrs. Breyer on December 5, 1966. The Hansens paid $3,000 down on a total purchase price of $5,680 but refused to pay the balance. The Breyers paid the full purchase price of $4,511.

In early 1966, apparently through an appointment arranged by Mr. Wadsworth, defendants appeared at the office of Mr. Carpenter, an attorney in Hemet specializing in estate planning and administration, for the purpose of inducing him to act as attorney for purchasers of Pure Trust in the Hemet area. During the meeting Lynam stated that the tax advantages of the Pure Trust were as represented in the pamphlets he had prepared and distributed and that the tax consequences had been determined by a case that had gone 'all the way to the Supreme Court.' When asked the name of the case, he was unable to recall it. Dunham stated that he had discussed the tax aspects with agents of the Internal Revenue Service but was unable to recall their names. Mr. Carpenter informed defendants that he disagreed with their representations and declined to become involved.

Mr. Carpenter also testified for the People as an expert witness. It was his opinion that by reason of the interest and control retained by the creator of the Pure Trust and the fact that the trust was revocable, estate and inheritance taxes would not be avoided.

Mr. Sierdorf, Assistant Inheritance Tax Attorney with the Inheritance and Gift Tax Division of the State Controller's office testified that he had examined the Pure Trusts involved in the present action and found that they were revocable and would not avoid inheritance taxes.

Over defendant's objections the prosecution was permitted to introduce into evidence and read to the jury certain orders issued in an action brought by the Attorney General in the Superior Court in Los Angeles under section 17500 of the Business & Professions Code to enjoin Lynam, Estate Organization Services, its officers and employees, and others from disseminating false and misleading advertising in the sale of Pure Trusts. The prosecution read to the jury (1) the provisions of a preliminary injunction issued on July 21, 1964, enjoining defendants, in substance, from representing that the Pure Trust would avoid personal liability and estate and inheritance taxes, (2) an order for summary judgment issued on September 28, 1964, in which it was recited that the court had determined that Lynam was the owner of Estate Organization Services and that in promoting the sale of Pure Trust in California he had made the false, misleading and deceptive statements alleged in the complaint and (3) the provisions of a permanent injunction issued on July 21, 1966, enjoining the defendants from representing that the Pure Trust would avoid personal liability, prevent probate or avoid estate or inheritance taxes.

The evidence was uncontradicted that the foregoing orders were applicable to defendants in the instant action and that each had notice of the contents thereof within a few days after their issuance. It was stipulated that at the time of the trial of the present action an appeal from the judgment in the injunction suit was pending. The judgment was affirmed on August 29 1967. (People ex rel. Mosk v. Lynam, 253 Cal.App.2d --- ², 61 Cal.Rptr. 800.)

Defendant Lynam admitted preparing and distributing pamphlets to promote the sales of Pure Trust but testified that in his opinion the representations made therein as well as those which he made orally were not prohibited by the preliminary injunction, that in his opinion there would be no estate or inheritance taxes because the trust would own the assets, and that co-defendant Dunham had received an oral opinion from the Internal Revenue Service that if 'properly used' the trust would avoid federal estate taxes. Dunham testified that there was a misunderstanding and that he did not obtain an opinion from the Internal Revenue Service. An Internal Revenue agent testified that an opinion on the estate tax consequences of the trust had never been requested from or given by the bureau.

Defendant Offley testified that she was the co-trustee and secretary-treasurer of Estate Organization Services, that she was authorized to draw checks on the bank account of the organization, that she notarized signatures of persons who executed Pure Trusts, that she acted as secretary to Mr. Lynam, and that during discussions with purchasers she took notes on the information necessary to complete the indenture forms. She testified that Lynam represented to purchasers that the Pure Trust would avoid estate and inheritance taxes and that the creator would avoid personal liability, but that she believed the representations were true, that Lynam continued to make the same representations after the preliminary injunction issued as he had been making prior to its issuance, and that although she was aware of the court orders and had read them, she did not believe that representations they made were prohibited.

Defendant Dunham testified that Lynam did make the representations charged, but that he believed that the Pure Trust device if 'properly used' would result in the tax advantages represented.

Defendants contend (1) that the court committed prejudicial error in permitting the People to introduce into evidence the civil orders; (2) that the court erred in instructing the jury on other offenses; (3) that the court erred in instructing the jury that the Pure Trust was revocable as a matter of law; and (4) that the evidence was insufficient to support the convictions.

I

Defendants contend that the evidence relating to the injunction suit was irrelevant, that it was prejudicial because the jury might have inferred that the suit was a criminal prosecution, and that the evidence was admissible because the pendency of the appeal stayed the injunction.

In overruling defendants' objections the court cautioned the jury that the civil orders were being received for the limited purpose of showing knowledge, intent and state of mind of the defendants and not to prove the truth...