NOTICE: NOT FOR PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE

LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

DENVER ENERGY EXPLORATION, LLC, a Texas limited liability 

company; and MICHAEL LEE CHRISTOPHER, an unmarried man, 

Plaintiffs/Appellants,

v.

ARIZONA CORPORATION COMMISSION, an administrative 

agency of the State of Arizona, 

Defendant/Appellee.

No. 1 CA-CV 15-0553

Appeal from the Superior Court in Maricopa County

No. LC 2014-000359-001

The Honorable Crane McClennen, Judge (Retired)

AFFIRMED

COUNSEL

Tiffany & Bosco, PA, Phoenix

By Robert D. Mitchell, Megan R. Jury, Sarah K. Deutsch

Counsel for Plaintiffs/Appellants

Arizona Corporation Commission Legal Division, Phoenix

By Paul Kitchin

Counsel for Defendant/Appellee
DENVER et al. v. AZCC

Decision of the Court

2

MEMORANDUM DECISION

Judge Margaret H. Downie delivered the decision of the Court, in which 

Presiding Judge Patricia K. Norris and Judge Samuel A. Thumma joined.

D O W N I E, Judge:

¶1 Denver Energy Exploration, LLC (“DEE”) and Michael Lee 

Christopher, DEE’s sole member and manager (collectively, 

“Appellants”), appeal from an order by the superior court affirming a 

final decision by the Arizona Corporation Commission (“Commission”). 

For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 In May 2011, the Securities Division of the Commission

(“Division”) filed a Temporary Order to Cease and Desist and Notice of 

Opportunity for Hearing. The Division alleged Appellants had offered or 

sold unregistered securities, failed to register as dealers or salesmen, and 

committed fraud in connection with the offer or sale of securities, in 

violation of Arizona Revised Statutes (“A.R.S.”) sections 44-1841, -1842, 

and -1991. Appellants denied the alleged violations and requested an 

evidentiary hearing. 

¶3 At the evidentiary hearing, a Commission investigator 

testified that the Division’s investigation began after he was contacted by 

an Arizona resident who had been solicited to invest in DEE oil and gas 

well projects. The investigator posed as a potential investor named 

“Jackson Roberts” and called DEE’s independent contractor — Arizona 

resident Craig Munsey — to inquire about DEE investment opportunities. 

Munsey sent the investigator information about available investments and 

offered him the “opportunity to become a joint venture partner.” The 

investigator also spoke with and received email communications from 

DEE’s sales/office manager. 

¶4 As part of the Division’s investigation, the investigator 

researched whether Appellants had committed past securities violations. 

He discovered a regulatory action against DEE by the Pennsylvania
DENVER et al. v. AZCC

Decision of the Court

3

Securities Commission.1 The investment at issue in the Pennsylvania 

proceedings was one of the projects Munsey discussed with the 

investigator when touting DEE’s experience in the oil and gas well

industry. The investigator was not informed of the Pennsylvania action, 

nor was the Pennsylvania matter disclosed in offering materials

Appellants sent to the investigator. 

¶5 The Commission concluded Appellants had: (1) offered and 

sold unregistered securities in violation of A.R.S. § 44-1841; (2) offered and 

sold securities “without being registered as a dealer and/or salesman” in 

violation of A.R.S. § 44-1842; and (3) “committed fraud in the offer and 

sale of unregistered securities” in violation of A.R.S. § 44-1991. Appellants

appealed the Commission’s decision to the superior court, which 

affirmed. Appellants timely appealed to this Court. We have jurisdiction 

pursuant to A.R.S. §§ 12-120.21(A)(1), 12-913, and 12-2101(A)(1).

DISCUSSION

¶6 “On appeal from the judgment of the superior court, we 

determine whether the underlying administrative decision of the 

Commission ‘was illegal, arbitrary, capricious, or involved an abuse of 

discretion.’” Shorey v. Ariz. Corp. Comm’n, 238 Ariz. 253, 257, ¶ 11 (App. 

2015) (citation omitted). The Arizona Securities Act (“ASA”), A.R.S. 

§§ 44-1801, et seq., is to “be liberally construed to effect its remedial 

purpose of protecting the public interest.” E. Vanguard Forex, Ltd. v. Ariz. 

Corp. Comm’n, 206 Ariz. 399, 410, ¶ 36 (App. 2003).

¶7 Appellants have not challenged the determination that they 

violated A.R.S. §§ 44-1841 and -1842 by offering or selling unregistered

securities and by failing to register as dealers or salesmen in Arizona. We 

therefore do not address those violations. See MT Builders, L.L.C. v. Fisher 

Roofing, Inc., 219 Ariz. 297, 304 n.7, ¶ 19 (App. 2008) (arguments not 

developed on appeal are waived). 

¶8 Regarding the securities fraud determination, the Division 

alleged, in pertinent part:

Unbeknownst to Unit offerees and purchasers, DEE was 

sanctioned by the Pennsylvania Securities Commission 

 

1 The Pennsylvania orders relate to the “Koomey/Morrison #3 

Prospect.” The named respondents in that matter are DEE, DEE 

independent contractor Frank Duvall, and Duvall’s company. 
DENVER et al. v. AZCC

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(“PSC”) on or about July 13, 2010, for offering and/or selling 

the Units within or from Pennsylvania, in violation of 

Section 201 of the Pennsylvania Securities Act of 1972, 

because the Units were not registered as securities to be 

offered or sold within or from Pennsylvania. . . . 

In resolving the Pennsylvania Enforcement Action, DEE 

consented to the entry of the final July 13, 2010, “Findings of 

Fact, and Conclusions of Law, and Order” in that action that 

orders DEE to pay a fine of $1,500, to comply with the 

Pennsylvania Securities Act of 1972, and/or stop offering or 

selling the unregistered Units to Pennsylvania residents in 

violation of the act . . . . 

Appellants do not contend they in fact disclosed the Pennsylvania 

regulatory action. They instead argue non-disclosure of the matter neither 

constituted a material omission nor made any “statements made” 

misleading under the ASA. 

¶9 The ASA is “designed to protect the public from fraud and 

deceit arising in securities transactions.” Shorey, 238 Ariz. at 257, ¶ 12

(citation omitted). The ASA’s anti-fraud statute, A.R.S. § 44-1991(A)(2), 

provides, in relevant part:

A. It is a fraudulent practice and unlawful for a person, in 

connection with a transaction or transactions within or 

from this state involving an offer to sell or buy securities, 

or a sale or purchase of securities . . . directly or indirectly 

to do any of the following:

. . .

2. Make any untrue statement of material fact, or omit to 

state any material fact necessary in order to make the 

statements made, in the light of the circumstances under 

which they were made, not misleading.

I. Materiality

¶10 Appellants contend the Pennsylvania action was immaterial 

to the offerings at issue here. They argue no reasonable investor would 

have found the Pennsylvania action significant because: (1) it involved a 

different independent contractor; (2) the investment offerings were

different; (3) no sales actually occurred in Pennsylvania; (4) the final
DENVER et al. v. AZCC

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Pennsylvania order “resulted in a nominal fine of $1,500;” and (5) an 

earlier cease and desist order issued by the Pennsylvania Securities 

Commission was prospectively rescinded by a later order.2 The 

Commission, however, concluded:

Although there were no complaints by any investors in this 

proceeding and the investor who was offered a refund chose 

not to accept it, the omission or misstatement of a material 

fact, the PSC Order, would be significant information to a 

reasonable investor. That is the relevant inquiry and not 

whether a particular investor would place any import in the 

statements by those in violation of the Act.[] Therefore, 

based on the record, we find that Respondents DEE and 

Mr. Christopher committed fraud in violation of A.R.S. 

§ 44-1991. 

¶11 The Commission properly applied an objective test to the 

materiality determination:

While A.R.S. § 44-1991(A)(2) expressly requires that the 

statement or omission be material, it is not necessary to 

show that the statement or omission was material to this 

particular buyer. Rather, a plaintiff must show that the 

statement or omission would have assumed actual 

significance in the deliberations of the reasonable buyer.

Aaron v. Fromkin, 196 Ariz. 224, 227, ¶ 14 (App. 2009). “Under this test, 

there is no need to investigate whether an omission or misstatement was 

 

2 The Amended Notice of Hearing demonstrates the Division’s reliance 

on the July 2010 Pennsylvania order, rather than the earlier cease and 

desist order. Moreover, although the July order prospectively rescinded 

the cease and desist order, that order also found “wil[l]ful” violations of 

the Pennsylvania Securities Act. The record does not support Appellants’ 

suggestion that the Commission impermissibly relied on the earlier cease 

and desist order in reaching its conclusions. Instead, the record shows the 

Commission discussed that cease and desist order in setting forth the 

background of the Pennsylvania proceedings. 
DENVER et al. v. AZCC

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actually significant to a particular buyer.” Trimble v. Am. Sav. Life Ins. Co., 

152 Ariz. 548, 553 (App. 1986).3 

¶12 Materiality is typically a question of fact, “but may be 

resolved as a matter of law where the information is so obviously 

important or unimportant to an investor that reasonable minds could not 

differ on the question of immateriality.” Caruthers v. Underhill, 230 Ariz. 

513, 524, ¶ 43 (App. 2012). The omission at issue here does not clearly fall 

at either end of the materiality/ immateriality spectrum and was thus 

properly decided by the Commission as a question of fact.4 Viewing the

facts in the light most favorable to upholding the Commission’s 

determination, Shorey, 238 Ariz. at 258, ¶ 14, the record supports the 

conclusion that reasonable investors could be concerned that DEE’s failure 

to abide by Pennsylvania securities laws in offering its oil and gas well 

investments would adversely affect such offerings made elsewhere. 

¶13 Assuming reasonable minds could differ about the 

materiality of Appellants’ omission, we will not substitute our judgment 

for that of the Commission, “even where the question is . . . debatable and 

one in which we would have reached a different conclusion had we been 

the original arbiter of the issues raised by the application.” Blake v. City of 

Phoenix, 157 Ariz. 93, 96 (App. 1988). We give deference to the 

Commission’s resolution of issues that draw on “the accumulated 

experience and expertise of its members.” Croft v. Ariz. State Bd. of Dental 

Exam’rs, 157 Ariz. 203, 208 (App. 1988); see also Vanguard Forex, 206 Ariz. at 

409, ¶¶ 35–36 (appellate court gives “great deference” to Commission’s 

interpretation of ASA). 

II. Misleading Statements

¶14 Appellants have an affirmative duty not to mislead potential 

investors. See Trimble, 152 Ariz. at 553. “This requirement not only 

removes the burden of investigation from an investor, but places a heavy 

burden upon the offeror not to mislead potential investors in any way.” Id. 

 

3 This well-established authority refutes Appellants’ contention that 

the Commission acted “contrary to the purpose” of the ASA by finding 

securities fraud “when there were no investor losses or complaints.” 

4 Because materiality was a question of fact, we do not find the

parties’ cited authorities to be particularly helpful. Nor have Appellants 

established that prior regulatory action is immaterial as a matter of law if 

it does not involve identical securities and parties. 
DENVER et al. v. AZCC

Decision of the Court

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(Emphasis added.) A material omission constitutes securities fraud if the 

omission makes an underlying statement misleading. A.R.S. 

§ 44-1991(A)(2). 

¶15 Appellants contend we should remand for the Commission 

to make factual findings regarding which specific statements were made 

misleading by the material omission it found. They argue that because the 

Commission made specific findings as to materiality, it was also required 

to expressly identify the misleading statements. However, “[i]n the 

absence of a statute or rule requiring an administrative board to make 

detailed findings of fact, none are required.” Justice v. City of Casa Grande, 

116 Ariz. 66, 68 (App. 1977). We instead consider the entire record to 

determine whether substantial evidence supports the conclusion that 

Appellants’ material omissions made underlying statements misleading. 

“Substantial evidence exists if either of two inconsistent factual 

conclusions are supported by the record.” Vanguard Forex, 206 Ariz. at 

409, ¶ 35. 

¶16 In promoting DEE’s investment offerings to the Division’s 

investigator, Munsey discussed the Koomey/Morrison #3 project that was 

the subject of the Pennsylvania proceedings, citing it as an example of 

DEE’s experience in the oil and gas well industry and touting that 

project’s high level of production. Although Munsey was apparently 

unaware of the Pennsylvania order at the time, a “speaker’s knowledge of 

the falsity of the statements is not a required element to proving fraud 

under A.R.S. § 44-1991(A)(2).” Fromkin, 196 Ariz. at 227, ¶ 15. 

¶17 Munsey also avowed to the investigator that DEE was 

“extremely moral and ethical,” and repeatedly praised the company 

during a telephone conversation, saying:

 “We have a great company.” 

 “We are a great company.” 

 “It’s an incredible business.” 

 “The company is good, they’re reliable, they’re real.” 

 “We’re a great company.” 

 “It is an incredible company and it is an incredible 

opportunity.” 
DENVER et al. v. AZCC

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 “It’s just an incredible company.” 

 “There’s nothing bad about us. We’re a great company. We

have an excellent reputation.” 

 “We’re very transparent.” 

¶18 Based on the record before it, the Commission reasonably 

concluded that failure to disclose the Pennsylvania action could mislead 

potential investors into believing DEE had never been sanctioned for 

securities violations. In fact, it had, and avowing that there was “nothing 

bad about” DEE and that the company enjoyed “an excellent reputation” 

could reasonably be viewed as a misrepresentation within the meaning of 

A.R.S. § 44-1991(A)(2). Moreover, DEE’s investor questionnaires 

emphasized its intent to fully comply with securities regulations and 

could lead the Commission to conclude such statements were intended to 

create confidence in the company, notwithstanding its past transgressions 

and its failure to follow the ASA by registering its securities and dealers/

salespersons in Arizona. 

CONCLUSION

¶19 For the foregoing reasons, we affirm the judgment of the 

superior court. We deny Appellants’ request for an award of attorneys’ 

fees and costs incurred on appeal because they have not prevailed.