People v. Park

• Decision Date: 20 December 1978
• Docket Number: Cr. 16947
• Citation: 87 Cal.App.3d 550,151 Cal.Rptr. 146
• Parties: , Blue Sky L. Rep. P 71,492 PEOPLE of the State of California, Plaintiff and Appellant, v. Willard Dean PARK, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 146

151 Cal.Rptr. 146

87 Cal.App.3d 550, Blue Sky L. Rep. P 71,492

PEOPLE of the State of California, Plaintiff and Appellant, v. Willard Dean PARK, Defendant and Respondent.

Cr. 16947.

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

Dec. 20, 1978.

Rehearing Denied Jan. 19, 1979.

Evelle J. Younger, Atty. Gen. of the State of California, Jack R. Winkler, Chief Asst. Atty. Gen. Crim. Div., Edward P. O'Brien, Asst. Atty. Gen., Derald E. Granberg, Stanley M. Helfman, Deputy Attys. Gen., San Francisco, for plaintiff and appellant.

Feldman, Waldman & Kline, Richard L. Jaeger, San Francisco, for defendant and respondent.

KANE, Associate Justice.

By information defendant Willard Dean Park (respondent) was charged with two counts of grand theft in violation of Penal Code, section 487, and one count of selling securities without registration in violation of Corporations Code, ¹ section 25110. The background facts giving rise to the criminal charges may be summarized as follows:

In December 1973, Sylvia W. Sullivan discussed with Douglas A. Freeman the possibility of investing in a condominium project called Casa Grande, to be built by T J Investment Co., Inc. (Corporation) at 532, 536 and 538 Callan Street, San Leandro. On January 13, 1974, she gave $20,000 to Freeman for the explicit purpose of investing in the project. In addition to Sullivan, Freeman succeeded in convincing another woman, Margaret A. Martin, to invest in the project. Raising the money by the sale of her home and furniture, on January 18 1974, Martin delivered to Freeman $20,000 to be used solely for the purpose of investing in the Casa Grande project.

According to a preliminary arrangement, the investors were to receive for their $40,000 investment the first $55,000 profit to be realized from the sale of the completed project. Freeman, who dealt directly with respondent and acted on behalf of the investors with respect to the project, was entitled to 10 percent of the profits to be earned by the investors, and in addition thereto he was to receive a 6 percent finder's fee from the Corporation. The record discloses that Freeman in fact did get a $2,400 finder's fee for his effort in acquiring the $40,000 investment capital from Sullivan and Martin.

In order to carry out the terms of the initial arrangement, Freeman and respondent signed an agreement on January 18, 1974 (Agreement). The Agreement called for the Corporation to acquire three lots in San Leandro on which a 16-unit condominium project would be constructed; and that in return for the $40,000 investment capital the Corporation would pay $55,000 from its first profit realized from the sale of the project. Significantly enough, however, the Agreement made no provision whatsoever for control, discretion or participation in the project by the investors. As a matter of fact, the Agreement failed even to name the actual investors who advanced the capital, simply describing Freeman as the "agent and trustee for certain persons." ² It is undisputed that the Agreement which evidenced the debt incurred by the Corporation and served as a security therefor was not registered as required by the Corporations Code (§ 25100 et seq.).

Although respondent was never given permission to use the money received from the investors for any purpose other than the Casa Grande project, and although respondent himself indicated to Freeman that the money in dispute would be used for development costs of the project, such as engineering, ground clearance, permits, and the like, the record is replete with evidence that respondent misappropriated the money for his own personal purposes. A summary of the pertinent financial transactions reveals that on January 16, 1974, respondent and his wife applied for a loan of $5,000 from the First State Bank of Northern California " 'to pay taxes.' " Simultaneously, they opened a personal joint tenancy checking account at the same bank and authorized deposit of the loan proceeds in that account. Respondent immediately issued a check to his wife from this new account for $3,000, although the $5,000 was not actually received into the account until January 18, 1974.

On January 21, 1974, Freeman deposited $15,000 into an escrow account with the First California Title Company pursuant to the Agreement. That same day, respondent withdrew the $15,000 and the next day deposited it into a new T J Investment Co., Inc. checking account at First State Bank.

The same day (January 22), respondent wrote two checks on the corporate checking account. One was for $9,000 payable to the Corporation. This money went into a separate account at Wells Fargo Bank. The other check for $4,500 went into respondent's personal joint account.

Also on that same day, respondent wrote numerous additional checks on the joint account, including one for $3,000 to the Internal Revenue Service for taxes; another for $1,000 to Creighton Churchill, attorney; another for $1,000 was withdrawn and deposited by respondent's wife at First Western Bank in Castro Valley. In addition, numerous smaller checks were also written on this joint account.

On January 31, 1974, an additional $25,000 was placed in the escrow account by Freeman pursuant to the Agreement. This total of $40,000 was all that was ever deposited in the escrow account. The same day respondent withdrew this money and deposited it in the account of the Corporation.

The very next day, respondent wrote two checks totaling $6,500 on the corporate account and deposited that amount of money in the personal joint account. He also wrote a check for $2,400 to Freeman for the finder's fee; in addition, he wrote a check for $1,000 to one Clarence E. Beaver as payment on a prior unrelated investment.

On February 1, 1974, $1,350 in the form of two checks went to respondent's wife from the joint account and were deposited to her account in First Western Bank in Castro Valley. On February 4, 1974, a debit memo was recorded against the joint account for $5,027.95, paying off the $5,000 tax loan. Between January 18 and February 6, numerous other checks were written out of the joint account for various purposes totaling $1,170.57.

In April 1974, Sullivan learned that there was a problem with the investment. Neither Sullivan nor Martin ever received any money back. The project was never built.

Based upon the foregoing facts the magistrate concluded that the criminal offenses included in the complaint were well founded, and as a result respondent was bound over to the superior court to answer the charges. Thereafter, an information was filed in the superior court accusing respondent of two counts of grand theft (Pen. Code, § 487) and one count of unlawful sale of an unqualified security (§ 25110). Respondent filed a motion to set aside the information pursuant to Penal Code, section 995, then separately moved to suppress evidence pursuant to Penal Code, section 1538.5. The trial court first granted the section 995 motion as to Count Three (§ 25110); then, after a further hearing, it granted the section 1538.5 suppression motion and dismissed the information.

The People contend on appeal that both rulings of the trial court are erroneous and that the information should be reinstated. For the reasons which follow, we agree with appellant and reverse the orders.

Violation of Securities Law : Before discussing the individual issues relating to the violation of section 25110, we spell out the basic rules pertaining to setting aside an information. As reiterated time and again, an information will not be set aside if there is some rational ground for assuming the Possibility that an offense has been committed and the accused is guilty of it (Rideout v. Superior Court (1967)67 Cal.2d 471, 474, 62 Cal.Rptr. 581, 432 P.2d 197). On a motion to set aside an information, the question of the guilt or innocence of the defendant is not before the court, nor does the issue concern the quantum of evidence necessary to sustain a judgment of conviction. The court is only to determine whether the magistrate, acting as a person of ordinary caution or prudence, could conscientiously entertain A reasonable suspicion that a public offense had been committed in which the defendant had participated (People v. Jablon (1957) 153 Cal.App.2d 456, 459, 314 P.2d 824). Neither the trial court in a Penal Code section 995 proceeding (People v. Landry (1964) 230 Cal.App.2d 775, 779, 41 Cal.Rptr. 202; Hacker v. Superior Court (1968) 268 Cal.App.2d 387, 392-393, 73 Cal.Rptr. 907) nor a reviewing court on appeal therefrom may substitute its judgment as to the weight of evidence for that of the committing magistrate (People v. Cirilli (1968) 265 Cal.App.2d 607, 612-613, 71 Cal.Rptr. 604; Rideout v. Superior Court, supra). Although the magistrate in reaching his decision may weigh the evidence, resolve conflicts, and give and withhold credence to witnesses, such a balancing of the evidence is not within the power of a tribunal reviewing the magistrate's order (Perry v. Superior Court (1962) 57 Cal.2d 276, 283-284, 19 Cal.Rptr. 1, 368 P.2d 529). Every legitimate inference that may be drawn from the evidence must be drawn in favor of the information (People v. Hall (1971) 3 Cal.3d 992, 996, 92 Cal.Rptr. 304, 479 P.2d 664; People v. Harmon (1973) 33 Cal.App.3d 308, 311, 108 Cal.Rptr. 43).

When viewed in light of the foregoing principles, we believe the legal rules and the facts of the case unequivocally support the finding of the magistrate that a section 25110 violation occurred. It follows that the trial court's holding, that the transaction in the instant case was a limited partnership which did not contravene section 25110, must be held erroneous on both legal and factual grounds.

In elaborating on the legal issues, as a first step we outline the statutory and regulatory scheme relating to the subject matter. Section 25019 provides in relevant part that " 'Security' means any...