People v. Mills

• Decision Date: 18 August 1958
• Docket Number: Cr. 6250
• Citation: 328 P.2d 1049,162 Cal.App.2d 840
• Court: California Court of Appeals Court of Appeals
• Parties: , Blue Sky L. Rep. P 70,397 The PEOPLE of the State of California, Plaintiff and Respondent, v. Homer C. MILLS, Defendant and Appellant.

Page 1049

328 P.2d 1049

162 Cal.App.2d 840, Blue Sky L. Rep. P 70,397

The PEOPLE of the State of California, Plaintiff and Respondent, v. Homer C. MILLS, Defendant and Appellant.

Cr. 6250.

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

Aug. 18, 1958.

Homer C. Mills, in pro. per.

Edmund G. Brown, Atty. Gen., Norman H. Sokolow, Deputy Atty. Gen., for respondent.

ASHBURN, Justice.

Defendant appeals from a judgment entered pursuant to his conviction of violation of two counts of the Corporate Securities Act (§ 26104(a) Corporations Code. ¹ The charges were that (1) on August 1, 1957, he sold and offered for sale to Robert H. Meng and Edwin A. Shrader 200,000 shares of stock in Clark Uranium & Copper Company, a Nevada corporation, without having a permit from the Commissioner of Corporations so to do, and (2) that on said date he offered to sell to said persons certificates of interest in a mining title and lease without having a permit from the Commissioner of Corporations. Defendant was also charged with two prior convictions of felony, one of which was violation of said § 26104(a), Corporations Code. At the beginning of the trial said felony convictions were admitted. Defendant was sentenced on each count for the term prescribed by law, said sentences to run concurrently with each other and with the sentence in Superior Court case No. 172196, which is the case reviewed and affirmed in People v. Mills, 148 Cal.App.2d 392, 306 P.2d 1005. Defendant also appeals from an order denying his motion for new trial.

Appellant's major contention is that there was no 'security' involved in his transaction with Meng and Shrader because they were to become members of a four-member board of directors of the corporation, Clark Uranium & Copper Company, and were to be vice-president and treasurer of the corporation, respectively, and one of them was to co-sign all checks with defendant Mills acting as president. Invoking People v. Staver, 115 Cal.App.2d 711, 252 P.2d 700, and People v. Jaques, 137 Cal.App.2d 823, 291 P.2d 124 appellant argues that any profit upon their investment could be reaped only through personal efforts of Meng and Shrader and hence the rule of cases such as People v. Syde, 37 Cal.2d 765, 768, 235 P.2d 601, People v. Gould, 37 Cal.2d 885, 235 P.2d 604, and Austin v. Hallmark Oil Co., 21 Cal.2d 718, 727, 134 P.2d 777, becomes applicable and controlling. In the Austin case the court said, 21 Cal.2d at page 727, 134 P.2d at page 782: 'If the transaction is one in which the assignee is merely an investor who for a consideration is given the right to share in the profits or proceeds of an enterprise to be conducted by others, the instrument representing such interest is a security. Where, however, as in the present case, the assignee is to share in the conduct of the enterprise, the instrument representing an assignment of a fractional interest in the production of oil is not a security within the act.'

The facts impliedly found by the jury do not bring this case within the aegis of the cited authorities. In examining the sufficiency of the evidence at bar we must 'assume in favor of the verdict the existence of every fact which the jury could have reasonably deduced from the evidence, and then determine whether such facts are sufficient to support the verdict.' People v. Newland, 15 Cal.2d 678, 681, 104 P.2d 778, 780. Hence the following resume of the facts is based primarily upon evidence favorable to the prosecution and made in the light of the impeachment of defendant's testimony growing out of his previous conviction of two felonies, which testimony presumptively was rejected by the jury and trial judge.

Mills, a disbarred lawyer (Mills v. State Bar, 6 Cal.2d 565, 58 P.2d 1273) who refers to himself as a retired lawyer with wide experience in mining matters and many years of familiarity with the Corporate Securities Law of California, inserted in the Los Angeles Times of July 21, 1957, an advertisement reading: 'Assoc. wanted for gold prospect. So. Cal. Good roads, rich ore. Box D-65, Times.' Meng and Shrader were investigators on the staff of the District Attorney; their superior officer, Lieutenant Morse, called Meng's attention to the advertisement and gave him certain instructions; Meng on July 22nd wrote to 'Box D-65' stating that he was interested in the ad, that his funds were limited but if the property sounded good he was in position to obtain additional money; he asked the addressee to contact him. On the 23rd defendant telephoned Meng and arranged a meeting for the 24th; they conversed on that day at the Plaza Hotel in Hollywood. Mills referred to a certain Clementine mine located about 35 miles from Barstow, California, and said he had discovered a vein bearing gold ore worth $1,400 per ton which ultimately should run around $60 a ton. Meng asked how much it would take to open the property and Mills said $10,000; when told that Meng then had only $3,000 but could raise more, he said that was enough to start with; that if it ran over $10,000 he would match dollar for dollar from the investing standpoint and each of them would receive 50 per cent; that it would be so set up; he would use a Nevada corporation known as Clark Uranium & Copper Company. Mills also said he held a lease on the mine and wanted Meng to go to the property to see the ore. Meng was to call him the next day. The asserted lease when received in evidence proved to be an option to buy the Clementine mining claim for $500 on or before January 1, 1958, with immediate possession and right of exploration conferred. For this document Mills had paid nothing. It bears the same date as the newspaper in which the advertisement was run. The parties finally arranged to go to the mine on the following Tuesday. When Mills arrived at Meng's house, Investigator Shrader was there and was introduced as a friend who was interested in the property and might invest some money. The three of them drove to Barstow and then to the mining claim. On the way, defendant was asked for proof that he had a lease and he exhibited the document of July 21st above mentioned; he called it a lease with option to purchase. Meng testified: 'On the trip to Barstow we discussed the matter of how the stock was to be issued, at which time Mr. Mills stated that 50 per cent of the stock would be issued to Mr. Shrader and myself. He also stated that he would hold the remaining 50 per cent of the stock and then he proceeded to describe what was to be done on the property. * * * He stated that there had been no application or articles of incorporation filed in the State of California and that no stock had ever been issued in the Clark Uranium. * * * and that there had never been a permit issued in the State of Nevada, either.

'He further stated that he would hold a meeting in Los Angeles here, at which time Mr. Shrader and myself would be placed on the board of directors, a members of the board of directors, and one of the other two parties who was on the board would be dropped and the meeting would then be adjourned and would reconvene in the El Cortez Hotel in Las Vegas, Nevada, at which time any changes in the articles of incorporation that had to be made would be made at that time and the stock would be issued up there and he would come back with the stock to California.' Proposed development and rental of one Duncan's equipment were also discussed. After an inspection of the property, at which no gold ore was visible, Mills said he could easily find the vein of ore and if they did not put up the money he would go ahead with the development himself; also that he would handle the operation and supervise it without salary until the mine was paying a profit; that Meng and Shrader would be members of the board of directors, one of them vice-president and the other secretary, but so far as the operation of the mine was concerned they would have nothing to do with it; would merely be members of the company board of directors. He also said the funds would be placed in a bank and either Meng or Shrader would sign checks.

Meng and Mills met again on July 31st, defendant saying 'he was very anxious to see me.' On that occasion defendant exhibited a copy of the articles of incorporation of the Clark company and two copies of a written 'Proposal' for Meng and Shrader. That document had been prepared by defendant who declared it needed no explanation. On the next day, August 1st, Meng and Shrader met defendant again at the Hollywood Plaza Hotel, having telephoned him that they would have their checks ready. At this meeting Mills explained that they would have a joint bank account in the company's name and he and one of the other two would be joint signers on any checks. Meng then said that business is business and he wanted something to show for his money, so Mills in his own handwriting dated the proposal, added 'O.K.' and placed his signature thereon. He also delivered a copy of minutes which he had drawn for a meeting of the corporate board of directors to be held on the next day in Long Beach and then adjourned to Las Vegas where the lease would be transferred to the company and shares of stock issued to Mills, Meng and Shrader, after which Mills was to bring back the stock to Meng and Shrader in California. He asked how they wanted the certificates issued and they told him. Defendant said no stock had been printed but 'we could use blank stock and fill those in or he could fill them in for us.' The corporation had no assets, had issued no stock, had no permit to sell stock and only one meeting had been held, that for the purpose of organization. Mills told Meng and Shrader to make their checks to the company; when Meng handed his check to defendant he in turn gave it to Shrader who was to be corporate treasurer. Upon signing and delivery of the proposals and the checks Meng gave a signal and other officers who were in the background came...