State v. Maxwell

Decision Date05 July 2016
Docket NumberDocket Nos. 33, 280 ,33,279
Citation384 P.3d 116
Parties State of New Mexico, Plaintiff–Appellee, v. Steven Maxwell, Defendant–Appellant, and Michael Maxwell, Defendant–Appellant.
CourtCourt of Appeals of New Mexico

Hector H. Balderas, Attorney General, Santa Fe, NM, Tonya Noonan Herring, Assistant Attorney General, Albuquerque, NM, for Appellee.

Bennett J. Baur, Chief Public Defender, Mary Barket, Assistant Appellate Defender, Santa Fe, NM, for Appellants.

OPINION

ZAMORA, Judge.

{1} Appellee's motion for rehearing is granted. The opinion filed in this case on June 20, 2016, is withdrawn and this Opinion is substituted in its place.

{2} In this consolidated appeal, Defendants Michael and Steven Maxwell were convicted of four counts each of fraud, contrary to NMSA 1978, Section 30–16–6 (2006) ; three counts each of securities fraud, contrary to NMSA 1978, Section 58–13B–30 (1986) (repealed 2009); and three counts each of transacting business as a broker-dealer without a license, contrary to NMSA 1978, Section 58–13B–3 (1986) (repealed 2009), under the New Mexico Securities Act of 1986, NMSA 1978, §§ 58–13B–1 to –57 (1986, as amended through 2004) (repealed 2009). Defendants challenge their convictions under the Securities Act, claiming that the convictions violate the prohibition against double jeopardy. Defendants also challenge several evidentiary rulings by the district court and argue that the evidence was insufficient to support their convictions. We affirm in part and reverse in part.

I. BACKGROUND

{3} Michael Maxwell met Robert and Carol Duncan (the Duncans) in 2006 when he began dating their granddaughter, Brianna Rotterdam. Brianna and Michael lived with the Duncans for a period of time while the two were saving up to purchase a home. Michael and his brother, Steven Maxwell (together Defendants, individually, Michael and Steven), discussed investment and business opportunities with the Duncans, and the four decided to do business together.

{4} In October 2007, the Duncans and Defendants signed articles of incorporation for an investment corporation named Ox Development, Inc. (Ox Development). The articles of incorporation reflect that the Duncans each contributed $ 135,000, and each was to have a 2.5 percent ownership interest in the company. Defendants were each supposed to contribute $ 600,000, and each would have a 47.5 percent ownership interest in the company. On October 26, 2007, Defendants helped the Duncans obtain a home equity loan on their house in the amount of $ 300,000. From the $ 300,000 loan, $ 30,000 went to interest on the loan. The Duncans understood that the remaining $ 270,000, which represented their combined contribution to Ox Development, would be saved for a real estate investment project in Santa Barbara, California.

{5} On five occasions between August 15, 2007 and May 9, 2008, the Duncans transferred funds to Defendants for investment purposes. According to the Duncans, each transfer was designated for a specific investment purpose. In total, Defendants received approximately $ 443,000 from the Duncans.

{6} By the end of May 2008 only $ 484.33 of the $ 448,558 transferred by the Duncans remained, and none of the investments or business opportunities presented to the Duncans had been realized. The Duncans became suspicious and reported to the Santa Fe County Sheriff's Office that they had been the victims of fraud. After an investigation, Defendants were indicted on five counts of fraud, three counts of securities fraud, three counts of transacting business as a broker-dealer without a license, two counts of selling or offering to sell unregistered securities, two counts of money laundering, one count of forgery, one count of racketeering, and one count of conspiracy to commit racketeering.

{7} Defendants' cases were consolidated prior to trial. At trial, a forensic accountant testified in detail about how the funds received from the Duncans were disbursed. The $ 448,558 was deposited into Defendants' own business accounts and was disbursed to Defendants in the form of checks or electronic transfers; taken out in cash withdrawals; used to pay some of Defendants' debt, rent, phone and utility bills; and spent on miscellaneous purchases including travel expenses, medical bills and purchases at stores including Dillard's, Wal–Mart, Smith's, gas stations, and convenience stores.

{8} Defendants testified that their plan was to start a development business with the Duncans and to pursue a number of investment opportunities. Defendants denied that each of the five sums of money they received from the Duncans was designated for one specific project. According to Defendants, they used the Duncans' investment to develop the company and to pursue various investment deals. Defendants testified that the Duncans understood that they would be funding the development of the business. However, Ox Development, the joint venture between Defendants and the Duncans, was never funded. Instead, the Duncans' money was deposited into accounts owned solely by Defendants, and was not carefully managed or accounted for.

{9} The defense presented some evidence that a portion of the money was used toward investment projects with the Duncans. Michael testified that some of the money was used to purchase land in Edgewood, New Mexico, and some was used to pay a contractor who was going to begin building houses on that property. Defendants also testified that $ 100,000 was used to purchase e-trade accounts. However, the e-trade accounts were in Defendants' names. The rest of the money was used for developing/maintaining Defendants' business and in the pursuit of investment opportunities and business deals. Defendants were both convicted of four counts of fraud, three counts of securities fraud, and three counts of transacting business as a broker-dealer without a license. This appeal followed.

II. DISCUSSION
A. Evidentiary Issues

{10} Defendants claim that the district court erred by preventing Michael from giving testimony that would have explained his conduct and intent and from giving testimony to impeach Mr. Duncan. Defendants also argue that the district court improperly admitted propensity evidence. We review the admission of evidence under an abuse of discretion standard and will not reverse in the absence of a clear abuse.” State v. Sarracino , 1998–NMSC–022, ¶ 20, 125 N.M. 511, 964 P.2d 72. “An abuse of discretion occurs when the ruling is clearly against the logic and effect of the facts and circumstances of the case. We cannot say the trial court abused its discretion by its ruling unless we can characterize it as clearly untenable or not justified by reason.” State v. Rojo , 1999–NMSC–001, ¶ 41, 126 N.M. 438, 971 P.2d 829 (internal quotation marks and citation omitted).

1. Exclusion of Testimony—Hearsay

{11} Defendants argue that the district court erred in prohibiting Michael from testifying regarding certain financial statements created by Michael showing payments made by Defendants to Mr. Duncan and introduced into evidence by the State. Defendants contend that Michael's intended testimony, that he prepared the statements at the Duncans' request, would have impeached Mr. Duncan's prior testimony that he did not know why Michael prepared the statements. The district court determined that the excluded testimony was hearsay because the testimony was being offered for the truth of the matter asserted.

{12} Rule 11–801(C) NMRA defines “hearsay” as “a statement that ... the declarant does not make while testifying at the current trial or hearing, and ... a party offers in evidence to prove the truth of the matter asserted in the statement.” In this case, Michael attempted to testify that he prepared account statements at Mr. Duncan's request. The purposes behind the testimony were purportedly to establish why Michael prepared the statements and to impeach Mr. Duncan's testimony that he did not know why Michael prepared the statements. Defendants do not explain how Michael's reason for preparing the statements is relevant except as impeachment evidence offered to undermine Mr. Duncan's veracity—in other words, Michael did not seek to offer the testimony to prove that Mr. Duncan requested the statements, but rather to prove that he was not truthful in his testimony.

{13} Although Defendants' argument is that the testimony was not offered for the truth of the matter asserted, the district court understood the testimony as being offered for the truth of the matter asserted by the statement—i.e., that it was offered to prove that Mr. Duncan had, in fact, requested the statements or a verbal act. See State v. Ruiz , 2007–NMCA–014, ¶ 36, 141 N.M. 53, 150 P.3d 1003 ([A] statement offered merely to prove that it was made, and not to prove truth, is characterized as a verbal act that is admissible irrespective of any limitations on hearsay testimony.” (internal quotation marks omitted)). The district court's interpretation, that the testimony was being offered for the truth of the matter asserted does not appear to be unreasonable, untenable, or unjustified by reasons. Therefore, we conclude that it did not abuse its discretion. See Rojo , 1999–NMSC–001, ¶ 41, 126 N.M. 438, 971 P.2d 829 ; cf. State v. Ramirez , 1976–NMCA–101, ¶ 40, 89 N.M. 635, 556 P.2d 43 (“The [district] court is still the best judge whether evidence tendered as a public record or compiled in regular course meets the standard of trustworthiness and reliability[,] which will entitle the record to stand as evidence of issuable facts.”), holding limited on other grounds as stated in Sells v. State , 1982–NMSC–125, ¶ 9, 98 N.M. 786, 653 P.2d 162.

{14} We believe the district court's explanation of its reasons for excluding the testimony “show[s] that it exercised its discretion and reached a result a judge reasonably might reach on the arguments and evidence. That is all we require to sustain a discretionary...

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