State v. Parks
| Decision Date | 25 September 2013 |
| Docket Number | No. DA 12–0253.,DA 12–0253. |
| Citation | 310 P.3d 1088,372 Mont. 88 |
| Parties | STATE of Montana, Plaintiff and Appellee, v. Terry Duane PARKS, Defendant and Appellant. |
| Court | Montana Supreme Court |
OPINION TEXT STARTS HERE
For Appellant: Robin A. Meguire, Meguirelaw.com; Great Falls, Montana.
For Appellee: Timothy C. Fox, Montana Attorney General; Katie F. Schulz, Assistant Attorney General; Helena, Montana, Fred R. Van Valkenburg, Missoula County Attorney; Missoula, Montana, Jesse Laslovich, Special Assistant Attorney General; Montana State Auditor's Office; Helena, Montana.
[372 Mont. 88]¶ 1 The State of Montana charged Terry Duane Parks in the Fourth Judicial District Court, Missoula County, with three counts of omitting material facts relating to his offer and sale of a security, in violation of § 30–10–301(1)(b), MCA. The jury found Parks guilty on all three counts. Parks now appeals.
¶ 2 We address the following issue on appeal: Whether § 46–11–410, MCA, precludes Parks' convictions on two of the three counts with which he was charged. We answer this question in the affirmative and, therefore, remand this case to the District Court with instructions as specified below. Parks raises two other issues on appeal; however, we do not address those issues for the reasons explained below.
¶ 3 The evidence presented at trial reflected the following facts. In 2007, Parks was involved in various rebuilding projects in the Gulf Coast area after Hurricane Katrina. Parks testified that banks were not lending in that area due to uncertainty, and so private funds were being sought for loans secured by real estate. To that end, Parks placed an advertisement in the Missoulian soliciting funds to facilitate the rebuilding projects. The advertisement appeared on March 30, 2007, in the Classified section of the Missoulian under the heading “Investments.” It stated:
24% well-secured fixed
1 yr. yield w/ Go Zone
trusts. Help rebuild
booming Gulf Coasts.
Terry, [phone number]
Parks explained at trial that “Go Zone” refers to Gulf Opportunity Zone.
¶ 4 Rece Cobeen, a gentleman from Plains, Montana, noticed the advertisement. He testified that what drew his attention was the 24 percent rate of return, the fact that it was “well-secured,” and “it sounded like it would be ... a good moneymaking opportunity.” Cobeen contacted Parks at the listed phone number. During their initial conversation, Parks explained that the one-year yield referenced in the advertisement involved “very large loans” secured by “multi-million dollar properties.” Cobeen did not have sufficient funds for these large loans, but was willing to invest smaller amounts. Parks testified that he told Cobeen
¶ 5 Cobeen asked Parks whether he had any references. Parks provided the name of an individual, Patrick Rummel, in Plains. Cobeen spoke with Rummel a few days later, received a “solid” reference regarding Parks, and then called Parks a second time. In this second conversation, Cobeen indicated that he wanted to invest $10,000. Parks reiterated that the one-year loans referenced in the advertisement were not available to Cobeen. He told Cobeen that the smaller, $10,000 loan would be at an annual rate of 24 percent, but on a five-year term. Parks asked Cobeen to wire the money to a bank in Missoula; however, Cobeen preferred to send a cashier's check. Parks told Cobeen to make the check out to “Tower Trust Two.” Parks was the trustee of Tower Trust Two.
¶ 6 Cobeen sent Parks a cashier's check for $10,000 dated April 19, 2007. In return, Parks sent Cobeen a document titled “Business Purpose Note,” which stated:
On this date, for an [sic] consideration of a private business purpose loan, the undersigned MAKER, Tower Trust Two, a Nevada private trust, [mailing address], promises to pay to Rece Cobeen, [mailing address], or order, PAYEE, principal in the amount of TEN THOUSAND DOLLARS ($10,000.00), plus accrued interest to the date of payment.
This note shall bear interest at the rate of TWENTY–FOUR PERCENT PER ANNUM (24%), compounded annually. Interest shall accrue and compound until paid with the principal due.
This note shall be due and payable in full, including all interest accrued, on April 16, 2012. It may be paid in part or in full before its due date without penalty.
If any action shall be required under law to collect this note, the MAKER agrees to pay all reasonable costs associated with said collection action, including reasonable attorney fees, if any.
This note is the liability of Tower Trust Two only, and not that of any individual person.
Made this 16th day of April, 2007.
[Parks' signature]
¶ 7 Several months later, Cobeen called Parks on his own initiative and indicated that he wanted to invest more money. Cobeen did not make any further inquiries about the nature of the investment, and Parks did not provide any additional information. Cobeen sent Parks a cashier's check for $35,000 dated August 27, 2007, and made out to Tower Trust Two. Parks, correspondingly, sent Cobeen another Business Purpose Note dated August 28, 2007, containing identical terms as the Business Purpose Note quoted above, except the amount was $35,000 and the due date was August 28, 2012.
¶ 8 Cobeen sent Parks two more checks, each for $5,000. In both instances, Cobeen sent the checks without contacting Parks first; he assumed the money would be invested the same way as his previous contributions. Both checks were made out, as before, to Tower Trust Two. Parks, in return, sent Cobeen two additional Business Purpose Notes, the first dated February 15, 2008, and the second dated July 15, 2008. The terms of these notes were the same as the two Business Purpose Notes issued in 2007, except that the duration of the $5,000 loans was four years rather than five.
¶ 9 At no point during their discussions did Parks state that he was a securities broker. In fact, Parks is not a securities broker and he is not licensed to offer or sell securities in Montana. Moreover, at no point did Parks tell Cobeen that the Business Purpose Notes were securities registered with the State. The notes, in fact, were not registered with the State. Lastly, Parks never provided Cobeen with any kind of prospectus or disclosure documentation regarding Tower Trust Two and the Business Purpose Notes.
¶ 10 After his final contribution in July 2008, Cobeen began to think that 24 percent was “a ridiculously high amount,” so he contacted Parks and “asked to take my money out.” Other than a $400 interest payment in June 2007, however, Cobeen never received any money from Parks. Cobeen then filed a complaint with the Office of the Commissioner of Securities and Insurance (CSI). Followingan investigation, the State filed an Information, then an Amended Information, charging Parks with three violations of § 30–10–301(1)(b), MCA. This statute states:
It is unlawful for any person, in connection with the offer, sale, or purchase of any security, directly or indirectly, in, into, or from this state, to ... make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
Section 30–10–301(1)(b), MCA (paragraph breaks omitted). The State alleged that Parks violated this statute, “on or about April 2007 through July 2008,” in three ways:
Count Two.1 Parks “made untrue statements or omitted material facts when he failed to inform [Cobeen] that he was not registered to offer or sell securities in Montana.”
Count Three. Parks “made untrue statements or omitted material facts when he failed to inform [Cobeen] that Tower Trust Two had not registered its securities in the state of Montana, nor had it applied for any type of an exemption from registration.”
Count Four. Parks “made untrue statements or omitted material facts by failing to provide [Cobeen] with any disclosure information regarding his investments in Tower Trust Two ‘Business Purpose Notes.’ ”
¶ 11 At trial, the prosecution called Lynne Egan, the Deputy Securities Commissioner with CSI. Among other things, Egan testified regarding three essential requirements of securities transactions in Montana. First, a person may not transact business in this State as a broker-dealer or salesperson unless the person is registered under the Securities Act of Montana. Section 30–10–201(1), MCA. The registration requirement is designed to ensure that individuals who are assisting people in the management of their money have the requisite knowledge and skill and are familiar with the applicable laws. Knowles v. State ex rel. Lindeen, 2009 MT 415, ¶ 5, 353 Mont. 507, 222 P.3d 595. Egan explained that broker-dealers and salespersons “have a duty to know their client [and] to only make recommendations to that client that are suitable for that client based on a thorough review of their financial background, their level of sophistication, their age, their liquidity needs, their risk tolerance and their investment objectives, and any other information that may be relevant to the transaction.”
¶ 12 Second, a person may not offer or sell a security in this State unless the security is registered under the Securities Act. Section 30–10–202, MCA. Egan explained that registering a security requires the filing of various documents, including audited financial statements, a copy of the prospectus, an opinion from an attorney attesting that the issuer can legally offer the security, a list of risk factors associated with the offering, and a description of the type of investment opportunity, whether an equity investment or a debt offering. CSI reviews the documents to ensure that the information is correct and that it would be in the public's interest to...
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