People v. Pahl

Decision Date24 August 2006
Docket NumberNo. 01CA2020.,01CA2020.
Citation169 P.3d 169
PartiesThe PEOPLE of the State of Colorado, Plaintiff-Appellee, v. Gary PAHL, Defendant-Appellant.
CourtColorado Court of Appeals

John W. Suthers, Attorney General, Karen E. Lorenz, Assistant Attorney General, Denver, Colorado, for Plaintiff-Appellee.

David S. Kaplan, Colorado State Public Defender, Kathleen A. Lord, Deputy State Public Defender, Denver, Colorado, for Defendant-Appellant.

Opinion by Judge BERNARD.

This opinion has been modified extensively. A complete copy of the new opinion follows.

Defendant, Gary Pahl, appeals the judgment of conviction entered upon jury verdicts finding him guilty of six counts of securities fraud, §§ 11-51-501 & 11-51-603, C.R.S. 2005; two counts of theft from an at-risk adult, § 18-6.5-103(5), C.R.S.2005; and one count of computer crime, Colo. Sess. Laws 1983, ch. 202, § 18-5.5-102(1) at 705-06. We affirm in part, reverse in part, and remand.

The evidence in this case established that defendant, in his capacity as president of Rautena Exploration Company, entered into a farmout agreement with Samson Oil Co. and Murfin Drilling Company. A farmout is an agreement in which one party contracts to perform drilling or exploratory operations on land leased by the other party. Under the terms of the farmout, Samson and Murfin transferred their oil and gas lease rights in Kiowa County, Colorado, to Rautena. Samson and Murfin retained a royalty interest, and Rautena agreed to drill a test oil well on the property.

Defendant contacted several people to solicit investments in the drilling operation, which he referred to as the "Salt Lake Prospect." Six people agreed to buy fractional working interests in the Salt Lake Prospect. Defendant agreed to drill the test well, and if the well produced oil, these investors would share in the profits. The investors signed a contract with defendant called a form 610 operating agreement. A form 610 agreement, also known as a joint operating agreement, is a commonly used form in the oil and gas industry to spread the risk of exploration among investors.

Months passed, however, and defendant did not drill the well. An investigation into Rautena's bank records revealed he had used the investors' money on personal expenses, and he had failed to disclose certain facts to them, specifically: (1) defendant had been advised by the State of Connecticut to cease and desist selling unregistered securities; (2) the Colorado Oil and Gas Conservation Commission had fined him for noncompliance with well drilling regulations; and (3) he had, in effect, abandoned his permit to drill a test well on the Salt Lake Prospect.

This appeal followed defendant's conviction of the offenses listed above.

I. Motion to Suppress

Defendant contends the trial court erred in denying his motion to suppress evidence seized as a result of a search of his home conducted pursuant to a warrant. We disagree.

A trial court's ruling on a motion to suppress presents a mixed question of fact and law. People v. Medina, 25 P.3d 1216 (Colo.2001). An appellate court must defer to the trial court's findings of fact if they are supported by competent evidence in the record, but reviews its conclusions of law de novo. People v. Garcia, 11 P.3d 449 (Colo. 2000).

A. Facts and Trial Court Ruling

One of the investors filed a complaint with the Colorado Division of Securities concerning money he had invested with Rautena in the Salt Lake Prospect. An investigator for the Division subpoenaed bank account records for Rautena and met with defendant. Defendant informed her he was having problems getting the well drilled and he would return the investors' money. He failed to do so, however, and further investigation revealed he had commingled the money with his personal funds and had also failed to disclose certain material facts to the investors before they decided to invest.

The trial court found that, based on this information, the investigator obtained a warrant for defendant's arrest. The investigator and two police officers went to defendant's home to execute the warrant. When they knocked on the door, defendant answered and stepped outside. He was holding a document describing an oil and gas venture, which he dropped on the ground when the officers placed him under arrest. Although defendant told the officers they could not search his home without a warrant, the investigator did so anyway.

The investigator subsequently prepared a search warrant for defendant's home, and his computer and several documents related to Rautena were seized when the warrant was executed. Defendant filed a motion to suppress.

At the hearing, the investigator testified she entered defendant's home out of concern for officer safety. The trial court found her testimony on this issue was not credible and ruled that the warrantless search was illegal.

However, the trial court denied the motion to suppress because it concluded, after redacting the portions of the affidavit in support of the search warrant based on the illegal search, that the remaining information established probable cause. The court also noted that the search and seizure could be upheld under the inevitable discovery doctrine.

B. Validity of the Search Warrant

Under the Fourth Amendment, a search warrant must be supported by probable cause, which must exist within the four corners of the affidavit. U.S. Const. amend. IV; Colo. Const. art. II, § 7; People v. Gall, 30 P.3d 145 (Colo.2001); People v. Randolph, 4 P.3d 477 (Colo.2000).

Where an affidavit includes information obtained unlawfully from a previous warrantless search as well as information from lawful origins, evidence discovered by execution of the search warrant is admissible if the search pursuant to the warrant was supported by information from sources independent of the unlawfully procured information. People v. Schoondermark, 759 P.2d 715 (Colo.1988). A court reviewing the legality of a search conducted pursuant to such an affidavit must answer two questions: was the officers' decision to seek a search warrant motivated by what they observed during the illegal search; and what effect did the illegally obtained evidence have on the decision of the magistrate issuing the search warrant? People v. Schoondermark, supra.

The Schoondermark test points out significant differences between the inevitable discovery doctrine and the independent source doctrine. As relevant here, the former requires that at the time the illegal search occurred, the police must be pursuing other lawful avenues which would have uncovered the evidence. People v. Diaz, 53 P.3d 1171 (Colo.2002). The latter focuses upon whether a search pursuant to a warrant, following an illegal search, was based upon information independent from what was observed during the illegal search. Murray v. United States, 487 U.S. 533, 108 S.Ct. 2529, 101 L.Ed.2d 472 (1988) (valid warrant obtained after illegal entry); People v. Schoondermark, supra (same).

The People argue the proper test to apply in these circumstances is instead found in People v. Hebert, 46 P.3d 473 (Colo.2002). There, the supreme court held that a search warrant is valid if the lawfully obtained information, considered alone, establishes probable cause to issue the warrant. The court held the police officers' warrantless entry into the defendant's home was not justified by the emergency aid exception to the warrant requirement, but that the affidavit for a search warrant provided sufficient probable cause to support the warrant after the illegally obtained information was redacted.

Defendant does not contest the trial court's ruling that the redacted affidavit established probable cause. Instead, citing People v. Cruse, 58 P.3d 1114 (Colo.App. 2002), he contends Hebert is inapplicable when police conduct an illegal search of the premises and then include information obtained in that search in the application for a warrant to search the same premises. In Cruse, a division of this court applied Schoondermark, while noting Hebert might impose a different standard.

There is no indication in Hebert that it overrules Schoondermark. On the contrary, Hebert never mentions Schoondermark, nor Murray v. United States, supra, the case Schoondermark relied upon in its analysis of the independent source doctrine. We are unaware of any subsequent Colorado Supreme Court case that indicates Schoondermark is no longer good law after Hebert. Because Schoondermark is direct binding precedent on this precise issue, we are bound by it.

On rehearing, defendant cites People v. Briggs, 709 P.2d 911 (Colo.1985), and argues we should not consider the independent source doctrine because the prosecution did not rely on it before the trial court. We disagree.

As part of his argument opposing the prosecution's reliance on People v. Hebert, supra, defendant referred to People v. Cruse, supra, in his reply brief. Defendant also provided a short discussion of the independent source doctrine, citing Murray v. United States, supra, and People v. Schoondermark, supra. While defendant noted the prosecution had not "invoked" the independent source doctrine in this case, it is clear defendant desired us to follow Cruse instead of Hebert.

Cruse held that, because we review the legal test applied in a suppression hearing de novo, we are obligated to apply the correct standard. People v. Cruse, supra. The supreme court took this same approach in People v. Schoondermark, supra, when it relied sua sponte on the independent source doctrine rather than the inevitable discovery argument the prosecution advanced.

1. Officers' Decision to Seek a Warrant

First, the trial court must find that the officers' decision to seek a search warrant was independent of their observations during the illegal entry. People v. Schoondermark, supra; People v. Cruse, supra. In both Schoondermark and Cruse, ...

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