People v. Wilson

• Decision Date: 14 February 1941
• Docket Number: No. 25867.,25867.
• Citation: 31 N.E.2d 959,375 Ill. 506
• Parties: PEOPLE v. WILSON.
• Court: Illinois Supreme Court

375 Ill. 506

31 N.E.2d 959

PEOPLE

v.WILSON.

No. 25867.

Supreme Court of Illinois.

Feb. 14, 1941.

Error to Second Division Appellate Court, First District, on Error to Cook County Court; Albert E. Isley, Judge.

John Taylor Wilson was convicted of violating the Illinois Securities Act and to review a judgment of the Appellate Court, 306 Ill.App. 216, 28 N.E.2d 287, which affirmed the judgment of conviction, he brings error.

Affirmed.Myer H. Gladstone and Russell Baker, both of Chicago, for plaintiff in error.

John E. Cassidy, Atty. Gen., Thomas J. Courtney, State's Atty., of Chicago, and A. B. Dennis, of Springfield (John T. Gallagher, John J. Phillips, and Nathan Kinnally, all of Chicago, of counsel), for defendant in error.

MURPHY, Justice.

Plaintiff in error, John Taylor Wilson, was convicted in the county court of Cook county for a violation of the Illinois Securities Act and sentenced to pay a fine of $1,000. He was ordered committed to the county jail until the fine and costs were paid. The appellate Court confirmed the judgment of conviction (People v. Wilson, 306 Ill.App. 216, 28 N.E.2d 287) and the case is here for further review on a writ of error to that court.

The second count of the amended information, upon which plaintiff in error was tried and convicted, charged, in substance, that he was an agent and official of the Chicago Gulf Corporation, the issuer of certain described securities, and that, on September 16, 1937, he unlawfully sold to J. Harold Lahman 41 certificates, described by serial number, which certificates were for 3,900 shares of the stock of said corporation. It was alleged the certificates were securities within the meaning of the Illinois Securities Act, that they were not registered and were not class ‘A’ or class ‘B’ certificates. The case was tried before the court without a jury.

The grounds for reversal are that the People did not prove plaintiff in error guilty beyond a reasonable doubt and that there was a fatal variance between the allegations and proof. Under the first point, it is contended the evidence shows that the stock sold was from the personal holdings of plaintiff in error and not the stock of the issuer, and that under sub-paragraph 1 of section 5 of the Illinois Securities Act (Ill.Rev.Stat.1939, chap. 121 1/2, par. 100) the stock sold was class ‘B’ stock and exempt from the registration requirements of the act.

Section 5 provides: ‘Securities in Class ‘B’, being exempted sales, shall include,' then follows sub-paragraphs 1 to 7, inclusive, which specify the character of sales which are to be considered as being in class ‘B.’ Sub-paragraph 1 is the only one material in this case and it provides: ‘The sale in good faith and with no intent to defraud, of any security by or on behalf of a vendor who is not an issuer, or underwriter or promoter of the issuer, or a dealer or broker; and who, being a bona fide owner of such security, disposes of his own property for his account; provided that such sale is not made directly or indirectly, for the benefit of the issuer, promoter, or an underwriter of such security, nor for the direct or indirect promotion of any scheme or enterprise of the issuer of such security.’ The specific question is as to who has the burden of proving that the sale of the stock in question was made under such circumstances as to exempt it under said sub-paragraph 1.

The material parts of the evidence are not in conflict. They show that the Chicago Gulf Corporation, of which plaintiff in error was president, was organized in March, 1930, under the laws of Delaware, for the purpose of establishing and maintaining an oil business with authority to acquire oil rights and to drill and prospect for oil, gas and other minerals and to dispose of any oil products obtained. Its principal property holdings were located in Texas, but it had an office in the city of Chicago. Various amendments were adopted in reference to the issuance of stock, but in August, 1936, the corporation was authorized to issue 600,000 shares of corporate stock divided into two classes, 500,000 shares of common stock of par value of $1 per share and 100,000 shares of class ‘A’ convertible preferred stock with no par value. In August, 1936, the company was in financial difficulties and plaintiff in error, as president, called a special meeting of the board of directors for the express purpose of considering ways and means of raising money to meet the immediate current liabilities.

A majority of the members of the board of directors was present at the meeting, which was held September 2, 1936, when plaintiff in error presented and read to the meeting the balance sheet of the corporationshowing its financial condition as of August 31, 1936. It showed accrued current liabilities of $44,387.33 as against current assets of $5,000. The report reflected the future needs and estimated them at $56,286.11. After the board had considered the financial condition, plaintiff in error proposed a plan of raising money which was put in the form of a resolution and adopted. It authorized the issuance to plaintiff in error of 100,000 shares of the common capital stock at $1 per share, for which he was to give his promissory note for $100,000 payable to the company, secured by a pledge of the shares of stock so issued. The resolution provided that plaintiff in error should have the right and privilege to withdraw from the pledge, on his trust receipt, convenient blocks of stock for sale. It also provided ‘that said John Taylor Wilson shall not sell, exchange or offer for sale said 100,000 shares of the common capital stock of this corporation, all or any part thereof to any person whomsoever, save and except persons, partnerships, association of persons and corporations exempted under the Illinois Securities law, unless and until 100,000 shares of the common capital stock of this corporation is qualified for sale under the Illinois Securities law.’ Pursuant to the resolution 99,795 shares of the common stock were issued to plaintiff in error and he executed the promissory note. The stock and note were held by the vice-president of the corporation as custodian.

The evidence discloses that plaintiff in error owned some common stock of the corporation which had been acquired prior to the $100,000 transaction and that October 13, 1937, he received 30,000 shares from the company in consideration of services to the company. A large amount of evidence was taken in endeavoring to trace the stock certificates involved and to determine the transaction from which plaintiff in error acquired them. However, the serial numbers of the stock certificates sold to the complaining witness were issued by the transfer agent of the corporation to plaintiff in error and were a part of the serial numbers included in the $100,000 transaction. The vice-president testified that, from time to time, plaintiff in error withdrew blocks of the stock on his trust receipt. Some of the shares were sold to persons other than the complaining witness. A resolution of the board of directors adopted October 13, 1937, shows that the $100,000 note given for the 100,000 shares of stock was discharged as follows: In part by payment of cash, return of blocks of stock totaling 57,395 shares and the taking of a new note for $24,993.14, secured by 25,025 shares of common stock.

Plaintiff in error contends that the settlement of October 13, 1937, which involved the cancellation of the $100,000 note, the surrender of a part of the certificates of stock included in the 100,000 shares and the giving of a new note, terminated the first transaction and that, thereafter, he held the stock in his own...