State v. Danek

Decision Date07 May 1993
Docket NumberNos. 13319,13372,s. 13319
Citation872 P.2d 889,117 N.M. 471,1993 NMCA 62
PartiesSTATE of New Mexico, Plaintiff-Appellant/Cross-Appellee, v. Robert DANEK, Defendant-Appellee/Cross-Appellant.
CourtCourt of Appeals of New Mexico
OPINION

CHAVEZ, Judge.

The State appeals the trial court's grant of a new trial to defendant after a jury convicted defendant of several securities law, commodities law, and pyramid promotional scheme violations.

Specifically, the State argues that the reasons given by the trial court were insufficient to grant a new trial because: (1) the State was entitled to present evidence of defendant's prior conviction to the jury, and (2) the jury was properly instructed on the definition of a security.

Defendant cross-appealed challenging the trial court's denial of defendant's motions to dismiss, for directed verdict, and for judgment notwithstanding the verdict. Defendant also filed a motion to dismiss the State's appeal on the ground the grant of a new trial was not a final order. We affirm the trial court's grant of a new trial. In light of our disposition, we do not address defendant's cross-appeal.

FACTS

This case arises from a marketing plan promoting American Gold Eagle Coins. American Gold Eagle Coins are gold bullion coins. Defendant Danek and co-defendant Adams were indicted on multiple counts of fraud, fraudulent securities or commodities practices, selling unregistered securities or commodities, transacting business as broker/dealer for a security or commodity without a license, operating an illegal pyramid promotional scheme, conspiracy, criminal solicitation, and racketeering. Shortly after trial began, the trial court granted co-defendant Adams a mistrial and severed his charges from those of defendant Danek. Therefore, this appeal deals solely with defendant Danek.

Operating through Success Marketing, Inc. (SMI), defendant marketed American Gold Eagle Coins through SMI's American Gold Eagle Bullion Coin Purchase Agreement (GPA). Essentially, the GPAs were a method of selling the coins through a down payment of twenty-five percent with full payment required within ninety days. As an option in the agreement, the purchaser of a GPA could earn commissions for sales of additional GPAs to others. The commissions could either be received directly or applied toward the balance of the seller's own GPA.

Defendant also promoted another program through an Independent Sales Representative Agreement (ISRA). Under that program people could become sales representatives for SMI and simply earn commissions by selling GPAs to other people. All of the victims involved in this case were GPA holders who were then encouraged to become sales representatives by recruiting two other people to purchase GPAs. GPA holders were free to simply pay off the contract and receive the coins without seeking others to participate. However, because of a twenty-five percent administrative markup fee that SMI charged on each GPA, simply buying the coins outright through the use of a GPA would result in paying $4 for every $3 worth of coin.

After trial, the jury returned a somewhat confusing verdict. Defendant was convicted of eight counts of fraudulent conduct in connection with the sale of commodities, unlawfully selling a commodity contract, transacting business as a securities broker, dealer, or sales representative without a license, and establishing, operating, advertising, or promoting a pyramid scheme. The unusual thing about the verdict is that the failure to disclose the prior fraud conviction was apparently the State's sole means of proving fraudulent commodities and securities practices. Yet, the jury only found fraud with respect to the sale of commodities. The trial court's interpretation of the verdict was that the jury may have acquitted defendant on the securities charges.

Defendant moved for a judgment notwithstanding the verdict or, in the alternative, for a new trial. The trial court granted the motion for a new trial. The grounds actually relied on by the trial court, as well as the correctness of the ruling, are disputed by the parties and will be discussed more fully below.

I. MOTION TO DISMISS

As mentioned above, the State appeals the trial court's grant of a new trial to defendant. In State v. Chavez, 98 N.M. 682, 652 P.2d 232 (1982) (Chavez I ), the Supreme Court held that the state was an aggrieved party entitled to appeal a trial court's grant of a new trial when a defendant has been found guilty by a jury. The trial court in Chavez I granted the defendant a new trial without providing the grounds for its ruling. The Supreme Court reasoned that where a jury reaches a verdict "after a trial which is fair and free from error", and such verdict is set aside, the State is aggrieved within the meaning of the New Mexico Constitution.

Defendant argues that Chavez I is distinguishable from this case, and the State's appeal should be dismissed because the order granting a new trial is not a final, appealable order. Defendant first argues that because the trial court did not enter judgment and sentence after the jury verdict, there is no final appealable order. However, SCRA 1986, 5-614(C) (Repl.Pamp.1992), requires that a motion for new trial be made and decided before the entry of judgment and sentence. Thus, we do not believe the lack of a judgment and sentence makes a difference for finality purposes, especially in light of Chavez I.

Defendant also contends that Chavez I is distinguishable from this case because it did not address the issue of finality. In addition, defendant seems to argue that Chavez I is different from this case because the trial court in that case did not state its grounds for granting a new trial on the record. Because the trial court in this case did state its grounds on the record, defendant argues the order is otherwise not appealable because it is not a final order.

As defendant suggests, Chavez I did not expressly discuss the finality aspect of a state's right to appeal from an order granting a defendant a new trial. As a general rule, the majority of other jurisdictions do not consider such orders appealable by the State due to lack of finality. See Charles C. Marvel, Annotation, Appeal by State of Order Granting New Trial in Criminal Case, 95 A.L.R.3d 596, 601, Sec. 4(a) (1979). However, there are some notable exceptions. For example, a direct appeal from an order granting a new trial is available if the appeal only involves a pure question of law. See Commonwealth v. Jones, 370 Pa.Super. 591, 537 A.2d 32 (1988); see also State v. Lynn, 120 S.C. 258, 113 S.E. 74 (1922); State v. White, 207 La. 695, 21 So.2d 877 (1945); State v. Lindsey, 302 N.W.2d 98 (Iowa 1981).

This Court has interpreted Chavez I to require a two-step analysis of a state's appeal of the grant of a new trial. See State v. Gonzales, 105 N.M. 238, 731 P.2d 381 (Ct.App.1986). First, the appellate court must determine whether the grant of a new trial was based on legal error. If so, the appellate court must then determine if it was a proper exercise of the trial Court's discretion to order a new trial due to the legal error.

The trial court's grounds for a new trial are set forth in the transcript of the hearing and then incorporated into the written order granting the new trial. As a result, there is some ambiguity concerning what the exact grounds relied upon by the trial court are, and what the grounds are that the parties dispute.

The State argues that the trial court only relied on two grounds for its decision: (1) the uniform jury instruction defining a security was an incorrect statement of the law, and (2) the admission of defendant's prior conviction was error. Defendant, however, argues that in addition to the above reasons listed by the State, the trial court relied on four additional grounds: (1) the trial court unfairly allowed the trial to become a battle of experts and then unfairly clothed the State's experts with a mantle of credibility, (2) the trial court allowed improper verdict forms to go to the jury, (3) the trial court erred by refusing to tender an instruction on the definition of commodity, and (4) cumulative error resulted in an unfair trial.

Our review of the trial court's reasoning leads us to believe that it was most concerned with the way in which expert testimony was admitted, and the probability that the court's manner of admitting expert testimony and instructing the jury gave the State an unfair advantage. Two remarks by the trial court are, in our view, particularly revealing. After stating that it believed its instruction on the definition of a security was wrong, the trial court stated:

[T]his case was somewhat a battle of experts as to definitions and as to what made both a security and a commodity. I allowed both parties to present evidence and experts, basically telling the jury what they thought the law was. I'm not sure, on second thought, that that's an appropriate way for this case to have proceeded.

If this case were to go on appeal, I think that would be found to be harmless error, because there was no objection from either side. But, what it does in this case is, when I gave the jury an instruction which went along specifically with the state's proposed instruction and what the state's experts said the law was, that gave the state's expert a standard of credibility much more than the defendant's.

Basically, the Court is saying that they agreed with the state's experts, therefore, the state's expert was right on everything. And I think that is error.

The State later pointed out that in Chavez II the Supreme Court ruled that a trial court's finding that...

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