State v. Goetz, Cr. N
| Decision Date | 15 October 1981 |
| Docket Number | Cr. N |
| Citation | 312 N.W.2d 1 |
| Parties | Blue Sky L. Rep. P 71,673 STATE of North Dakota, Plaintiff and Appellee, v. Edmer A. GOETZ, Defendant and Appellant. os. 771, 772. |
| Court | North Dakota Supreme Court |
Peter A. Quist and Joan B. Weiner, Asst. Attys. Gen., Bismarck, for plaintiff and appellee State of North Dakota; argued by Peter A. Quist, Bismarck.
Jonathan T. Garaas, of Garaas Law Firm, Fargo, for defendant and appellant.
Edmer Goetz appealed from a judgment of conviction of violating North Dakota securities laws entered after a jury trial in the district court of Burleigh County. We affirm.
Goetz was charged in two informations of offering for sale or selling securities when not registered as a dealer or salesman (Section 10-04-10, N.D.C.C.) and for offering for sale or selling unregistered securities (Section 10-04-04, N.D.C.C.). Evidence was presented at trial that Goetz issued personal promissory notes for $83,000 to four persons in Burleigh County and another $78,000 to four other persons outside Burleigh County between February 1978 to August 1979. A certificate of the Securities Commissioner was introduced to show that neither Goetz nor his promissory notes were registered. Goetz was sentenced to concurrent five-year terms for each conviction, with three years of each sentence suspended.
Goetz raises 18 issues on appeal.
In the first issue he contends that the preliminary hearing was defective because there was only one witness, an investigator for the Securities Commissioner who subsequently became the prosecutor at trial. All parties conceded that this could have resulted in difficulty but nothing occurred at trial which created problems. Goetz also appears to be complaining that the State was not required to present its entire case at the preliminary hearing and therefore he did not know the nature of the charges against him. Rule 5.1(a) of the North Dakota Rules of Criminal Procedure requires a magistrate at a preliminary examination to hold a defendant for trial if "it appears from the evidence that there is probable cause to believe that an offense has been committed and that the defendant committed it, ..." The testimony at the preliminary hearing indicated that Goetz had issued promissory notes for money to a number of persons in Burleigh County between February 1978 and August 1979 and that Goetz also argues that the preliminary hearing was defective because of a lack of evidence that the promissory notes were securities. Section 10-04-02(12), N.D.C.C., contains the definition of "security":
neither Goetz nor the notes had been registered with the Securities Commissioner. Sufficient evidence was presented to allow the magistrate to conclude that an offense had been committed and that Goetz committed it.
" 'Security' shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation, certificate of interest in oil, gas, or other mineral rights, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, program, contract, or other arrangement in which persons invest in a common enterprise the returns of which depend to any extent upon inducing other persons to participate or invest in the enterprise, voting-trust certificate, or beneficial interest in title to property, profits or earnings, or any other instrument commonly known as a security, including any guarantee of, temporary or interim certificate of interest or participation in, or warrant or right to subscribe to, convert into, or purchase any of the foregoing." (Emphasis added.)
Goetz contends that the words "or other arrangement in which persons invest in a common enterprise the returns of which depend to any extent upon inducing other persons to participate or invest in the enterprise, ..." state a condition which all securities must meet to come within this definition. Goetz argues that because there was no evidence at the preliminary hearing to satisfy this phrase the hearing was defective and no probable cause should have been found.
Goetz could have secured a review of the finding of probable cause by petitioning the district court for a writ of certiorari if he believed that the county judge had exceeded his jurisdiction in making a finding of probable cause. Sec. 32-33-09, N.D.C.C.; State v. Morrissey, 295 N.W.2d 307 (N.D.1980). However, because Goetz raises the definition of "security" in other issues also, we will address his concern here.
The language cited by Goetz does not modify those words which precede it, as Goetz argues. The use of "or" does not transform that phrase into one which modifies or conditions the language before it. The definition lists various instruments which are considered to be "securities" for purposes of Chapter 10-04, N.D.C.C. Goetz's interpretation of the language in Section 10-04-02(12) would, as an example, result in requiring that the term "or other mineral rights" also modify or condition the language before it. We construed this definition in State v. Weisser, 161 N.W.2d 360 (N.D.1968), by concluding that a personal promissory note written on a standard note form furnished by the defendant, given in exchange for money, was a security: "A personal promissory note is a 'note' and also 'evidence of indebtedness' and included in the Securities Act of 1951." 161 N.W.2d at 365. Goetz, however, argues that Weisser is not dispositive because the language he cites was added after Weisser was decided. While the language was added after the Weisser decision, we do not believe that Weisser is so limited. The 1973 Legislature amended Section 10-04-02(12) by adding the words Goetz cites, among others. H.B. 1278 § 2, 1973 N.D.Sess.Laws Ch. 81. According to the minutes of the House Committee on Industry, Business, and Labor for February 20, 1973, the Securities Commissioner testified that the legislation was drafted by his office in order to close loopholes in the securities laws. The Securities Commissioner stated that the bill would better protect the investing public while not placing any undesirable obstacles in front of those seeking public money to finance legitimate business ventures. 1 This persuades Goetz's second issue is that "Both informations should have been dismissed in that more than one offense is charged therein." Rule 8(a), N.D.R.Crim.P., allows two or more offenses to be charged in the same information if they "are of the same or similar character or are based on the same act or transaction or on two or more acts or transactions connected together or constituting parts of the common scheme or plan." Testimony at the preliminary hearing indicated that Goetz had given promissory notes to several persons in exchange for money, the form of the notes was substantially the same, and that similar transactions were made by Goetz outside Burleigh County. The informations therefore complied with Rule 8(a).
us that Weisser was not changed by the 1973 amendment. The amendment added to the list of instruments which are securities; it did not modify nor restrict the instruments listed but rather increased the instruments included within the definition of "security."
Goetz's third issue is that the charges in the informations violate the equal-protection provisions of the United States and North Dakota Constitutions. U.S.Const.Amend. XIV, § 1; N.D.Const. Art. I, § 21. We do not agree. He argues that the classification system which exempts some transactions (Sec. 10-04-06, N.D.C.C.) and some securities (Sec. 10-04-05, N.D.C.C.) from registration is not rationally related to legitimate government objectives. He claims that the exemptions contained in the Securities Act do not promote the purpose of the Securities Act, which he argues is to protect the public from fraud.
The purpose of the Securities Act is not only to prevent fraud or deception but also to prevent the disposal of securities on unfair terms, or where the proposed plan of business appears to be unfair, unjust, or inequitable. Sec. 10-04-08.1, N.D.C.C. Within the Act is a three-part framework for protecting investors and the public. The first part regulates securities. It is unlawful to offer for sale or to sell securities in North Dakota unless they are either registered with the Securities Commissioner or are within an exemption. Sec. 10-04-04, N.D.C.C. The second part regulates the people who offer, sell, or provide security-investment advice. They must register with the Securities Commissioner unless a transactional exemption exists. Sec. 10-04-10, N.D.C.C. The third part prohibits fraud when securities are offered for sale, sold, or purchased, or when security advice is given. Secs. 10-04-10.1(1) and 10-04-15, N.D.C.C. Each serves different purposes. The part which regulates securities ensures that people receive relevant information about securities upon which they can base their investment decisions and protects investors from securities which do not meet statutory standards. The purpose of registering the people involved in security transactions is to prevent unqualified, unethical, and fraudulent persons from entering the securities business; to supervise the activities of persons in the securities business after they have registered; and to enforce the statutory standards by suspending or revoking registrations for noncompliance. The fraudulent-practices provisions give the Securities Commissioner a number of options to combat activities which are fraudulent. His actions may range from issuing public warnings and investigating activities suspected of being fraudulent to pursuing administrative actions or criminal prosecutions.
Some categories of securities and transactions are exempt from registration Goetz's fourth issue is that the statutes under which he was convicted are vague and thus violate due-process provisions of the United...
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