State v. Hoephner

• Decision Date: 30 January 1978
• Docket Number: No. 0-77-539,0-77-539
• Citation: 574 P.2d 1079
• Court: United States State Court of Criminal Appeals of Oklahoma. Court of Criminal Appeals of Oklahoma
• Parties: Blue Sky L. Rep. P 71,397 The STATE of Oklahoma, Appellant, v. Michael Jerome HOEPHNER, a/k/a Michael Jerome Hefner, Appellee.

Page 1079

574 P.2d 1079

Blue Sky L. Rep. P 71,397

The STATE of Oklahoma, Appellant, v. Michael Jerome HOEPHNER, a/k/a Michael Jerome Hefner, Appellee.

No. 0-77-539.

Court of Criminal Appeals of Oklahoma.

Jan. 30, 1978.

An appeal from the District Court, Oklahoma County; William S. Myers, Jr., Judge.

The State of Oklahoma has perfected an appeal to this Court on a Reserved Question of Law. Answered in the AFFIRMATIVE.

Andrew M. Coats, Dist. Atty., James A. Jennings, III, Asst. Dist. Atty., Oklahoma County, Warren F. Bickford, IV, Associate Gen. Counsel, Oklahoma Dept. of Securities, Oklahoma City, for appellant.

Leo Thompson, David B. Windham, Oklahoma City, for appellee.

OPINION

PER CURIAM:

Appellee, Michael Jerome Hoephner, also known as Michael Jerome Hefner, hereinafter referred to as the defendant, was charged with the offense of Selling an Unregistered Security, in violation of 71 O.S.1971, § 301. At the end of the State's evidence, the defendant moved for a directed verdict of acquittal. The District Court Judge sustained the defendant's motion on the ground that the State had not established that the transaction in question involved a security. From that ruling, the State has timely appealed under 22 O.S.1971, § 1053, P 3.

The evidence at trial established that the defendant was not a registered agent with the Oklahoma Securities Commission; nor were any securities issued in the name of Hefner Enterprises registered with the Oklahoma Securities Commission. The court did not allow testimony that the defendant previously had been ordered by the Oklahoma State Securities Commission to cease and desist from the sale of securities.

Mrs. Gwendolyn Abbott, a 74-year-old retired woman, testified that the defendant had come to her home when her insurance agent came to deliver her a duplicate copy of an insurance policy. While there, the defendant asked her if she had any money on which she wanted to make more interest or income, saying that he could get her nine to eleven percent more interest than she would be able to get on a conventional savings account. The defendant then took one of Mrs. Abbott's blank checks and wrote out a check for $1,500.00 to Hefner Investment Company, and Mrs. Abbott signed the check. She testified that she thought she was investing in something which would give her more interest on her money. She said that she did not have $1,500.00 either to lend or to give away and that she just wanted to make a little money to supplement her $500.00 a month retirement income.

The check, dated September 11, 1975, was placed into evidence. Several days later, the defendant and Mrs. Abbott's insurance agent returned to her home and gave her a promissory note with a due date of September 1, 1976. That promissory note was entered into evidence. Mrs. Abbott asked for her money back, but the defendant and the insurance agent refused to return it to her and asked her to sign the promissory note, which she refused to do.

The Oklahoma Securities Act provides in 71 O.S.1971, § 301, that, "It is unlawful for any person to offer or sell any security in this state unless (1) it is registered under this act or (2) the security or transaction is exempted under section 401," and Section 407 of the Act ¹ makes the violation of Section 301 a felony. Section 2 of the Act defines a security as "any note", ² "unless the context otherwise requires." (Emphasis ours) As the trial judge sustained the defendant's motion for a directed verdict on the grounds that the State did not show evidence of a security which was required to be registered under the Act, the only issue we need deal with is whether the promissory note in question was a security which was required to be registered under the Act.

As this Court has held in Sisson v. State, Okl.Cr., 404 P.2d 55 (1964); and Nelson v. State, Okl.Cr., 355 P.2d 413 (1960), showing that a security is one of a class exempted from the registration requirements of Section 301 is an affirmative defense, and the burden is on the defendant to bring himself within the terms of the exemption. Therefore, we need not determine whether the note in question falls under one of the 26 exemptions for registration set out in Section 401 as the defendant never contended that it does.

There are no Oklahoma cases construing the meaning of the definition of security as "any note," but the United States Supreme Court recently quoted Securities & Exch. Com. v. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946), in a case construing the definition of security as an investment contract. ³ In Howey, the United States Supreme Court stated that the Federal Securities Acts embody a "flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits." 328 U.S. at 299, 66 S.Ct. at 1103. So is it with the Oklahoma Securities Act.

Section 501 of Oklahoma's Act ⁴ provides that the Oklahoma Securities Act should be construed to "effectuate its general purpose to make uniform the law of those states which enact it and to coordinate the interpretation and administration of this act with the related federal regulation." Therefore, we must look to other jurisdictions to formulate our definition of the phrase "any contract."

Largely because of the language "unless the context otherwise requires," or similar language in other acts, it has been held that the phrase "any note" does not really mean any note. See, Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 553, 19 L.Ed.2d 564, 569 (1967), in which the United States Supreme Court said that, "in searching for the meaning and scope of the word 'security' in the (Securities Exchange) Act (of 1934), form should be disregarded for substance and the emphasis should be on economic reality. . . . " (Citation omitted) Considering the concept of substance over form and the fact that there are other statutory systems to deal with usual commercial and consumer transactions, other jurisdictions have drawn the distinction between commercial notes and investment notes in determining whether or not a note shall be treated as a security. At one end of the spectrum, if proceeds are used to purchase consumer goods or services, then the note clearly has a commercial character. See, Zabriskie v. Lewis, 507 F.2d 546 (10th Cir. 1974), in which the test used was whether or not a transaction is of a kind for which stock is often actually given. At the other end of the spectrum, the Seventh Circuit in Sanders v. John Nuveen & Co., Inc., 463 F.2d 1075, 1080 (1972), stated that "a person who seeks to invest his money and receives a...