State v. Ribadeneira
| Decision Date | 02 August 1991 |
| Docket Number | No. 65721,65721 |
| Citation | 817 P.2d 1105,15 Kan.App.2d 734 |
| Parties | STATE of Kansas, Appellee, v. Hugo RIBADENEIRA, Appellant. |
| Court | Kansas Court of Appeals |
Syllabus by the Court
1. Under the Kansas Securities Act, the defendant in a securities violation prosecution has the burden of producing evidence to support the affirmative defenses set forth in K.S.A. 17-1262, and the provisions of K.S.A. 17-1272 do not unconstitutionally shift the burden of proof to the defendant.
2. The sale of a general partnership interest in a limited partnership may constitute the sale of a security. The determination of whether the sale of a general partnership interest is the sale of a security is a question of fact to be determined by the trier of fact.
3. Under the facts shown, the sale of a general partnership interest was the sale of a security because the ultimate success and control of the enterprise rested on defendant's managerial and entreprenurial skills rather than those of the purchaser of such interest.
4. Kansas has no rule or statute adopting federal regulation 15c2-4, 17 C.F.R. § 240.15c2-4 (1990) of the Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq. (1988), as the law of Kansas. Accordingly, it was error to instruct the jury that the failure of a broker to comply with the provisions of federal regulation 15c2-4 was a fraudulent, deceptive, or manipulative practice as a matter of law in Kansas.
5. Whether the failure of a broker or dealer to comply with federal regulation 15c2-4 is a fraudulent, deceptive, or manipulative practice is a question of fact to be determined by the jury.
6. Under the facts shown, the giving of instruction 21 was not harmless error and was so prejudicial as to require reversal of defendant's conviction.
7. Securities violations are not specific intent crimes, and the information is not defective for failure to allege the element of scienter.
8. Where a mistrial is declared on the joint motion of the defendant and the State, a defendant may not claim that the second 9. A trial court may permit the State to amend its information at any time before the verdict if the amended information: (1) does not charge a new or additional crime; and (2) the substantial rights of the defendant are not prejudiced by such amendment.
trial violates his right to be protected from double jeopardy absent proof that the judicial misconduct giving rise to the mistrial was intended to provoke the defendant into moving for a mistrial.
10. The sufficiency of a preliminary hearing may only be challenged by a motion filed within 20 days after arraignment. The failure to file such a motion constitutes a waiver of any objections to the sufficiency of the preliminary hearing.
11. A "sale" of a security takes place when the security is sold or transferred for "value." The question of whether defendant made a "profit" on such sale is irrelevant. The only relevant question is whether the sale was for "value."
12. The fact that the defendant's conviction for fraud in the sale of a security is reversed does not disqualify that sale for use by the State in overcoming an isolated transaction defense to the charge of selling securities while unregistered.
John V. Wachtel, Jacqueline K. Levings, and Troy H. Gott, of Klenda, Mitchell, Austerman & Zuercher, Wichita, for appellant.
Roger N. Walter, Gen. Counsel, Office of Securities Com'r of Kan., Topeka, for appellee.
Before LARSON, P.J., and LEWIS and PIERRON, JJ.
This is an appeal by the defendant, Hugo Ribadeneira, from his convictions of two counts of securities fraud, one count of selling securities while not registered as a broker, and one count of selling unregistered securities. As a result of his convictions, the defendant was sentenced to a term in the custody of the secretary of corrections, and restitution was ordered in the amount of $35,272.80.
The facts of this case are complex and rather convoluted. We will not, however, state them in detail but only as necessary to discuss the numerous issues involved in this appeal. During the years of 1983, 1984, and 1985, the defendant was involved in a number of building projects in Wichita. In order to accomplish these projects, two limited partnerships were formed, and the defendant was involved in managing and selling units in the limited partnerships to investors. One of these limited partnerships was known as Emporia Street Limited Partnership, and will be referred to in this opinion as ESLP. The other limited partnership is known as North Rock Road Limited Partnership, and will be referred to in this opinion as NRRLP.
The State charged that the defendant committed various and sundry fraudulent, deceptive, and misleading actions concerning the sale of units in ESLP and NRRLP. There were a number of investors who the State alleges were defrauded by the defendant's activities.
Ultimately, it appears that the ventures in which the limited partnerships were involved were failures. The individuals who had purchased units in those limited partnerships from the defendant lost some, if not all, of their money.
The defendant was charged with four counts and tried on the third amended information filed in this action. He was ultimately convicted, as noted above, and appeals those convictions. Further facts concerning the defendant's crimes will be developed as necessary in dealing with the many issues raised by the defendant on this appeal.
The defendant has briefed and argued 13 separate specifications of error on this appeal. We shall deal with each specification of error on an individual basis.
K.S.A. 17-1262 lists 17 types of transactions which are exempted from the Since it is the defendant in this matter who wishes to claim the benefit of exemptions under 17-1262, the provisions of 17-1272 place the burden of such proof upon him. This, defendant claims, is an unconstitutional shifting of the burden of proof from the State to the defendant and deprives him of due process. We do not agree.
provisions of K.S.A. 17-1254 and K.S.A. 17-1255. If any of the defendant's activities fell within one of those 17 exemptions, the action would not be criminal. K.S.A. 17-1272 provides that the State need not negate, in the indictment or information, any of these exemptions. The statute provides that the burden of proving any of the exemptions "shall be upon the party claiming the benefit of such exemption."
We dealt with this issue specifically and precisely in State v. Kershner, 15 Kan.App.2d 17, 801 P.2d 68 (1990). In Kershner, the same issue was raised, and we decided it adversely to the defendant, holding that 17-1272 does not unconstitutionally shift the burden of proof to defendant. We held that 17-1272 merely required a defendant to produce such facts, if they existed, as might exonerate him from the crime charged. The exemptions listed in the statute constitute affirmative defenses which the defendant legitimately has the burden of proving. In addition to Kershner, a number of our sister states have taken the same approach to the issue. See Commonwealth v. David, 365 Mass. 47, 309 N.E.2d 484, 490 (1974); State v. Fries, 214 Neb. 874, 883, 337 N.W.2d 398 (1983); State v. Hoephner, 574 P.2d 1079, 1081 (Okla.Crim.1978); State v. Crooks, 84 Or.App. 440, 734 P.2d 374 (1987).
On the basis of Kershner and the other decisions listed above, we hold defendant's claim of an unconstitutional shifting of the burden of proof is without merit.
Among other things, defendant was charged with defrauding Dr. Monty Menhusen. The facts show that Dr. Menhusen purchased a general partnership interest in ESLP. The defendant argues that a general partnership interest is not a security and, hence, the sale was not in violation of the law.
The question we must determine is whether, under the facts and circumstances presented, the sale of a general partnership interest in ESLP was or could be found to be the sale of a security.
There are a number of tests that have been applied to determine whether a particular item or interest sold is a security. The United States Supreme Court, in S.E.C. v. Howey Co., 328 U.S. 293, 66 S.Ct. 1100, 90 L.Ed. 1244 (1946), developed a three-prong test to determine whether an interest sold was a security. The Howey test defines a security as (1) an investment of money, (2) in a common enterprise, (3) with the expectation that profits will be derived solely from the efforts of others. 328 U.S. at 301, 66 S.Ct. at 1104. The third prong, as emphasized, is the key element in defining whether a particular investment is a security or is some other form of investment.
The Howey test was amended by the United States Supreme Court in United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 95 S.Ct. 2051, 44 L.Ed.2d 621 (1975). The court in Forman held that a security was an investment "in a common venture premised on a reasonable expectation of profits to be derived from the entrepreneurial and managerial efforts of others." 421 U.S. at 852, 95 S.Ct. at 2060.
These definitions of a security have been largely adopted in Kansas in State ex rel. Owens v. Colby, 231 Kan. 498, 646 P.2d 1071 (1982), and Activator Supply Co. v. Wurth, 239 Kan. 610, 722 P.2d 1081 (1986). In Colby, the court indicated that, in determining whether a particular financial relationship constitutes an "investment contract" and, therefore, a security under K.S.A. 17-1252(j), the test to be applied is whether the contractual arrangement involves an investment of money in a common enterprise with profits to come from the efforts of others. This test is to be applied in light of the economic realities of the particular contractual arrangement ...
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